As filed with the Securities and Exchange Commission on May 3, 1994
Registration No. 33-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
Registration Statement Under the Securities Act of 1933
FOURTH FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
KANSAS 48-0761683
(State or other jurisdiction (I.R.S. Employer Identi-
of incorporation) fication Number)
6021
(Primary Standard Industrial Classification Code Number)
100 North Broadway
Wichita, Kansas 67202
316/292-5339
(Address, Including ZIP Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
WILLIAM J. RAINEY
Fourth Financial Corporation
Post Office Box 4, 100 North Broadway
Wichita, Kansas 67201
316/292-5339
(Name, Address, Including ZIP Code, and Telephone Number,
Including Area Code, of Agent for Service)
COPIES TO:
BENJAMIN C. LANGEL WILLIAM P. TRENKLE, JR.
Foulston & Siefkin Mangan, Dalton, Trenkle, Rebein & Doll, Chtd.
700 Fourth Financial Center 208 West Spruce
Wichita, Kansas 67202 Dodge City, Kansas 67801-4425
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this Registration Statement
becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of each class Amount to be Proposed maximum Proposed maximum Amount of reg-
of securities to be registered (1) offering price aggregate offering istration fee
registered per unit (2) price (2)
____________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Common Stock, 662,220 shares $14.56 $9,639,591.20 $3,324
$5 Par Value
============================================================================================================
<FN>
(1) Estimated maximum number of shares to be issued.
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule
457(f) based on the book value at December 31, 1993 of the common stock to be
received by Registrant in the mergers.
</TABLE>
------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until
this Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<TABLE>
<CAPTION>
FOURTH FINANCIAL CORPORATION
Cross Reference Sheet
Required by Item 501(b) of Regulation S-K
Item in Location or Heading
Form S-4 Caption in Prospectus
- -------- ------- -------------------
<S> <C> <C>
1. Forepart of Registration State-
ment and Outside Front Cover Page
of Prospectus . . . . . . . . . . . . . . . Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . . . . . Inside Front Cover Page
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other Infor-
mation . . . . . . . . . . . . . . . . . . . Summary
4. Terms of the Transaction . . . . . . . . . . The Agreement and Proposed
Mergers
5. Pro Forma Financial Information . . . . . . . Pro Forma Financial
Statements
6. Material Contacts with the Company
Being Acquired . . . . . . . . . . . . . . . The Agreement and Proposed
Mergers -- Background of the
Mergers, -- Recommendation
of the Boards of Directors;
Reasons for the Mergers,
-- Interests of Mr. Harding
in the Mergers, --
Management after the Mergers
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Underwriters . . . . . . Not Applicable
8. Interests of Named Experts and
Counsel . . . . . . . . . . . . . . . . . . Legal Matters; Experts;
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . . . . . Not Applicable
10. Information with Respect to S-3
Registrants . . . . . . . . . . . . . . . . Information Concerning
Fourth Financial; Financial
Statements and Related
Information
11. Incorporation of Certain Information
by Reference . . . . . . . . . . . . . . . . Information Incorporated by
Reference
12. Information with Respect to S-2 or
S-3 Registrants . . . . . . . . . . . . . . Not Applicable
13. Incorporation of Certain Information
by Reference . . . . . . . . . . . . . . . . Not Applicable
14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants . . . . . . . . . . . . . . . . Not Applicable
15. Information with Respect to S-3
Companies . . . . . . . . . . . . . . . . . Not Applicable
16. Information with Respect to S-2
or S-3 Companies . . . . . . . . . . . . . . Not Applicable
17. Information with Respect to Companies
Other than S-3 or S-2 Companies . . . . . . . Information Concerning First
Dodge, First National and
MBI; Market Prices of and
Dividends on First Dodge
Stock, First National Stock,
MBI Common Stock, and Fourth
Stock; Description of
Capital Stock of First
Dodge, First National, and
MBI; The Special Meetings;
Ownership of First Dodge,
First National, and MBI
Stock; Financial Statements
and Related Information
18. Information if Proxies, Consents
or Authorizations are to be
Solicited . . . . . . . . . . . . . . . . . . Cover Page; Summary; The
Special Meetings;
Information Incorporated by
Reference; The Agreement and
Proposed Mergers --
Interests of Mr. Harding in
the Mergers, --Appraisal
Rights of Dissenting
Stockholders, -- Expenses;
Ownership of First Dodge,
First National, and MBI
Stock; Deadline for
Submission of Fourth
Financial Stockholders'
Proposals for the 1995
Annual Meeting of
Stockholders
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange
Offer . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
First Dodge City Bancshares, Inc.
619 Second Avenue
Dodge City, Kansas 67801
May 16, 1994
Dear Stockholder:
You are cordially invited to attend a special meeting of the
stockholders of First Dodge City Bancshares, Inc. ("First Dodge") to
be held at 619 Second Avenue, Dodge City, Kansas, on June 15, 1994,
at 9:50 a.m., Central Daylight Savings Time.
At the meeting, stockholders will be asked to approve and
adopt an Agreement and Plan of Reorganization, dated as of February
2, 1994 (the "Agreement"), among First Dodge, First National
Bancshares of Dodge City, Inc., ("FNB"), Metro Bancshares, Inc.
("MBI"), Metro Bank of Broken Arrow, First National Bank and Trust
Company in Dodge City, the stockholders of First Dodge, and Fourth
Financial Corporation ("Fourth Financial"), and a related Agreement
of Merger among First Dodge, FNB, MBI, and Fourth Financial (the
"Fourth Merger Agreement"). The Agreement and the Fourth Merger
Agreement provide for, among other things, the merger of First Dodge,
FNB, and MBI into Fourth Financial (the "Fourth Merger"), and the
conversion of each share of common stock of First Dodge into the
right to receive 112.42 shares of common stock, par value $5 per
share, of Fourth Financial ("Fourth Stock").
The Board of Directors of First Dodge has carefully reviewed
and considered the terms and conditions of the proposed Agreement and
the Fourth Merger Agreement. THE BOARD OF DIRECTORS OF FIRST DODGE
HAS CONCLUDED THAT THE PROPOSED TRANSACTIONS ARE IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF FIRST DODGE AND RECOMMENDS THAT
FIRST DODGE STOCKHOLDERS VOTE "FOR" THE AGREEMENT AND THE FOURTH
MERGER AGREEMENT.
The accompanying Notice of Special Meeting of Stockholders and
Joint Proxy Statement-Prospectus and the accompanying Form 10-K of
Fourth Financial, contain a detailed description of these
transactions and other important information relating to Fourth
Financial, First Dodge, and the combined companies. If the Fourth
Merger becomes effective, stockholders will be instructed promptly as
to the procedures to be followed in exchanging their stock
certificates for certificates of Fourth Stock. Please do not send
any certificates for your shares at this time.
We urge you to review the enclosed materials carefully and to
date, sign, and return to First Dodge the accompanying Proxy in the
enclosed envelope as soon as possible so that your shares will be
represented at the Special Meeting. Sending in your proxy now will
not interfere with your rights to attend the meeting or to vote your
shares personally at the meeting if you wish to do so.
Sincerely,
/s/ John V. Harding
President
Metro Bancshares, Inc.
619 Second Avenue
Dodge City, Kansas 67801
May 16, 1994
Dear Stockholder:
You are cordially invited to attend a special meeting of the
stockholders of Metro Bancshares, Inc. ("MBI") to be held at 619
Second Avenue, Dodge City, Kansas on June 15, 1994, at 11:00 a.m.,
Central Daylight Savings Time.
At the meeting, stockholders will be asked to approve and
adopt an Agreement and Plan of Reorganization, dated as of February
2, 1994 (the "Agreement"), among First Dodge City Bancshares,
Inc.("First Dodge"), First National Bancshares of Dodge City, Inc.
("FNB"), MBI, Metro Bank of Broken Arrow, First National Bank and
Trust Company in Dodge City, the stockholders of First Dodge, and
Fourth Financial Corporation ("Fourth Financial"), and a related
Agreement of Merger among First Dodge, FNB, MBI, and Fourth Financial
(the "Fourth Merger Agreement"). The Agreement and the Fourth Merger
Agreement provide for, among other things, the merger of First Dodge,
FNB, and MBI into Fourth Financial (the "Fourth Merger"), and the
conversion of each share of common stock of MBI not owned by First
Dodge into the right to receive 0.30 shares of common stock, par
value $5 per share, of Fourth Financial ("Fourth Stock").
The Board of Directors of MBI has carefully reviewed and
considered the terms and conditions of the proposed Agreement and the
Fourth Merger Agreement. THE BOARD OF DIRECTORS OF MBI HAS CONCLUDED
THAT THE PROPOSED TRANSACTIONS ARE IN THE BEST INTERESTS OF THE
STOCKHOLDERS OF MBI AND RECOMMENDS THAT MBI STOCKHOLDERS VOTE "FOR"
THE AGREEMENT AND THE FOURTH MERGER AGREEMENT.
The accompanying Notice of Special Meeting of Stockholders and
Joint Proxy Statement-Prospectus and the accompanying Form 10-K of
Fourth Financial, contain a detailed description of these
transactions and other important information relating to Fourth
Financial, MBI, and the combined companies. If the Fourth Merger
becomes effective, stockholders will be instructed promptly as to the
procedures to be followed in exchanging their stock certificates for
certificates of Fourth Stock. Please do not send any certificates
for your shares at this time.
We urge you to review the enclosed materials carefully and to
date, sign, and return to MBI the accompanying Proxy in the enclosed
envelope as soon as possible so that your shares will be represented
at the Special Meeting. Sending in your proxy now will not interfere
with your rights to attend the meeting or to vote your shares
personally at the meeting if you wish to do so.
Sincerely,
/s/ John V. Harding
President
First National Bank and Trust Company in Dodge City
619 Second Avenue
Dodge City, Kansas 67801
May 16, 1994
Dear Stockholder:
You are cordially invited to attend a special meeting of the
stockholders of First National Bank and Trust Company in Dodge City
("First National") to be held at 619 Second Avenue, Dodge City,
Kansas, on June 15, 1994, at 10:00 a.m., Central Daylight Savings
Time.
At the meeting, stockholders will be asked to approve and
adopt an Agreement and Plan of Reorganization, dated as of February
2, 1994 (the "Agreement"), among First Dodge City Bancshares, Inc.
("First Dodge"), First National Bancshares of Dodge City, Inc., Metro
Bancshares, Inc., Metro Bank of Broken Arrow, First National, the
stockholders of First Dodge, and Fourth Financial Corporation
("Fourth Financial"), and a related Agreement to Merge between First
National and BANK IV Kansas, National Association (the "BANK IV
Kansas Merger Agreement"). The Agreement and the Bank IV Kansas
Merger Agreement provide for, among other things, the merger of First
National into BANK IV Kansas, National Association (the "BANK IV
Kansas Merger"), and the conversion of each share of common stock of
First National not owned by First National Bancshares of Dodge City,
Inc. into the right to receive 95.92 shares of common stock, par
value $5 per share, of Fourth Financial ("Fourth Stock").
The Board of Directors of First National has carefully
reviewed and considered the terms and conditions of the proposed
Agreement and the BANK IV Kansas Merger Agreement. THE BOARD OF
DIRECTORS OF FIRST NATIONAL HAS CONCLUDED THAT THE PROPOSED
TRANSACTIONS ARE IN THE BEST INTERESTS OF THE STOCKHOLDERS OF FIRST
NATIONAL AND RECOMMENDS THAT FIRST NATIONAL STOCKHOLDERS VOTE "FOR"
THE AGREEMENT AND THE BANK IV KANSAS MERGER AGREEMENT.
The accompanying Notice of Special Meeting of Stockholders and
Joint Proxy Statement-Prospectus and the accompanying Form 10-K of
Fourth Financial, contain a detailed description of these
transactions and other important information relating to Fourth
Financial, First National, and the combined companies. If the BANK
IV Kansas Merger becomes effective, stockholders will be instructed
promptly as to the procedures to be followed in exchanging their
stock certificates for certificates of Fourth Stock. Please do not
send any certificates for your shares at this time.
We urge you to review the enclosed materials carefully and to
date, sign, and return to First National the accompanying Proxy in
the enclosed envelope as soon as possible so that your shares will be
represented at the Special Meeting. Sending in your proxy now will
not interfere with your rights to attend the meeting or to vote your
shares personally at the meeting if you wish to do so.
Sincerely,
/s/ John V. Harding
Chairman and Chief
Executive Officer
First Dodge City Bancshares, Inc.
619 Second Avenue
Dodge City, Kansas 67801
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held June 15, 1994
NOTICE IS HEREBY GIVEN that a special meeting of the
stockholders of First Dodge City Bancshares, Inc., a Kansas
corporation ("First Dodge") will be held at 619 Second Avenue, Dodge
City, Kansas on June 15, 1994, at 9:50 a.m., Central Daylight Savings
Time, for the following purposes:
1. To approve and adopt: an Agreement and Plan of
Reorganization, dated as of February 2, 1994, (the
"Agreement"), among First Dodge, First National Bancshares of
Dodge City, Inc., ("FNB"), Metro Bancshares, Inc.("MBI"), Metro
Bank of Broken Arrow, First National Bank and Trust Company in
Dodge City, the stockholders of First Dodge, and Fourth
Financial Corporation, a Kansas corporation ("Fourth
Financial"); a related Agreement of Merger among First Dodge,
FNB, MBI, and Fourth Financial (the "Fourth Merger Agreement");
and the transactions contemplated by the Agreement and the
Fourth Merger Agreement, all as more fully described below and
in the attached Joint Proxy Statement-Prospectus; and
2. To transact any other business that may properly
come before the Special Meeting.
As more fully described in the Agreement and the attached Joint
Proxy Statement-Prospectus, the Agreement and the Fourth Merger
Agreement, copies of which are attached as Annex I to the attached
Joint Proxy Statement-Prospectus, provide for, among other things,
(i) the merger of First Dodge, FNB, and MBI into Fourth Financial,
and (ii) the conversion of each of the presently outstanding shares
of common stock of First Dodge into the right to receive 112.42
shares of common stock, par value $5 per share, of Fourth Financial.
In order to approve the Agreement and the Fourth Merger
Agreement, the affirmative vote of the holders of at least a majority
of the issued and outstanding common stock of First Dodge is
required.
Only stockholders of record at the close of business on May 11,
1994, are entitled to notice of and to vote at the meeting.
TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO
DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE. Sending in your proxy now will not
interfere with your rights to attend the meeting or to vote your
shares personally at the meeting if you wish to do so.
All stockholders are cordially invited to attend the meeting.
Dodge City, Kansas
May 16, 1994
---------------------------------------
Thomas P. Shirley, Secretary
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
Metro Bancshares, Inc.
619 Second Avenue
Dodge City, Kansas 67801
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held June 15, 1994
NOTICE IS HEREBY GIVEN that a special meeting of the
stockholders of Metro Bancshares, Inc., an Oklahoma corporation
("MBI") will be held at 619 Second Avenue, Dodge City, Kansas, on
June 15, 1994, at 11:00 a.m., Central Daylight Savings Time, for the
following purposes:
1. To approve and adopt: an Agreement and Plan of
Reorganization, dated as of February 2, 1994, (the
"Agreement"), among First Dodge City Bancshares, Inc. ("First
Dodge"), First National Bancshares of Dodge City, Inc. ("FNB"),
MBI, Metro Bank of Broken Arrow, First National Bank and Trust
Company in Dodge City, the stockholders of First Dodge, and
Fourth Financial Corporation, a Kansas corporation ("Fourth
Financial"); a related Agreement of Merger among First Dodge,
FNB, MBI, and Fourth Financial (the "Fourth Merger Agreement");
and the transactions contemplated by the Agreement and the
Fourth Merger Agreement, all as more fully described below and
in the attached Joint Proxy Statement-Prospectus; and
2. To transact any other business that may properly
come before the Special Meeting.
As more fully described in the Agreement and the attached Joint
Proxy Statement-Prospectus, the Agreement and the Fourth Merger
Agreement, copies of which are attached as Annex I to the attached
Joint Proxy Statement- Prospectus, provide for, among other things,
(i) the merger of First Dodge, FNB, and MBI into Fourth Financial,
and (ii) the conversion of each of the presently outstanding shares
of common stock of MBI not owned by First Dodge into the right to
receive 0.30 shares of common stock, par value $5 per share, of
Fourth Financial.
In order to approve the Agreement and the Fourth Merger
Agreement, the affirmative vote of the holders of at least a majority
of the issued and outstanding common stock of MBI is required.
Only common stockholders of record at the close of business on
May 11, 1994, are entitled to notice of and to vote at the meeting.
TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO
DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE. Sending in your proxy now will not
interfere with your rights to attend the meeting or to vote your
shares personally at the meeting if you wish to do so.
All stockholders are cordially invited to attend the meeting.
Dodge City, Kansas
May 16, 1994
---------------------------------------
Thomas P. Shirley, Secretary
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
First National Bank and Trust Company in Dodge City
619 Second Avenue
Dodge City, Kansas 67801
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held June 15, 1994
NOTICE IS HEREBY GIVEN that a special meeting of the
stockholders of First National Bank and Trust Company in Dodge City,
a national banking association ("First National") will be held at 619
Second Avenue, Dodge City, Kansas on June 15, 1994, at 10:00 a.m.,
Central Daylight Savings Time, for the following purposes:
1. To approve and adopt: an Agreement and Plan of
Reorganization, dated as of February 2, 1994, (the
"Agreement"), among First Dodge City Bancshares, Inc. ("First
Dodge"), First National Bancshares of Dodge City, Inc.,
("FNB"), Metro Bancshares, Inc., Metro Bank of Broken Arrow,
First National, the stockholders of First Dodge, and Fourth
Financial Corporation, a Kansas corporation ("Fourth
Financial"); a related Agreement to Merge between First
National and BANK IV Kansas, National Association ("BANK IV
Kansas")(the "BANK IV Kansas Merger Agreement"); and the
transactions contemplated by the Agreement and the BANK IV
Kansas Merger Agreement, all as more fully described below and
in the attached Joint Proxy Statement-Prospectus; and
2. To transact any other business that may properly
come before the Special Meeting.
As more fully described in the Agreement and the attached Joint
Proxy Statement-Prospectus, the Agreement and the BANK IV Kansas
Merger Agreement, copies of which are attached as Annex I to the
attached Joint Proxy Statement-Prospectus, provide for, among other
things, (i) the merger of First National into BANK IV Kansas, and
(ii) the conversion of each of the presently outstanding shares of
common stock of First National not owned by FNB into the right to
receive 95.92 shares of common stock, par value $5 per share, of
Fourth Financial.
In order to approve the Agreement and the BANK IV Kansas Merger
Agreement, the affirmative vote of the holders of at least two-thirds
of the issued and outstanding common stock of First National is
required.
Only stockholders of record at the close of business on May 11,
1994, are entitled to notice of and to vote at the meeting.
TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO
DATE, SIGN, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE. Sending in your proxy now will not
interfere with your rights to attend the meeting or to vote your
shares personally at the meeting if you wish to do so.
All stockholders are cordially invited to attend the meeting.
Dodge City, Kansas
May 16, 1994
---------------------------------------
Anna M. Schilling, Secretary
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
PROSPECTUS
662,220 SHARES
FOURTH FINANCIAL CORPORATION
Common Stock, $5 Par Value
____________________
FIRST DODGE CITY BANCSHARES, INC.
METRO BANCSHARES, INC.
FIRST NATIONAL BANK AND TRUST COMPANY IN DODGE CITY
JOINT PROXY STATEMENT
This Joint Proxy Statement-Prospectus is being furnished in
connection with the solicitation of proxies by the Boards of Directors
of First Dodge City Bancshares, Inc., a Kansas corporation ("First
Dodge"), Metro Bancshares, Inc., an Oklahoma corporation ("MBI"), and
First National Bank and Trust Company in Dodge City, a national banking
association ("First National"), in connection with special meetings of
stockholders of First Dodge, MBI, and First National (collectively the
"Special Meetings") to be held on June 15, 1994, and all adjournments
or postponements thereof.
At the Special Meetings, the respective stockholders of
First Dodge, MBI, and First National will be asked to consider and vote
upon proposals to approve and adopt an Agreement and Plan of
Reorganization, dated as of February 2, 1994, among First Dodge, MBI,
First National, First National Bancshares of Dodge City, Inc. ("FNB"),
Metro Bank of Broken Arrow, the stockholders of First Dodge, and Fourth
Financial Corporation, a Kansas corporation ("Fourth Financial") (as it
may be amended, supplemented, or otherwise modified from time to time,
the "Agreement"). The stockholders of First Dodge and MBI will also
vote on a related merger agreement (the "Fourth Merger Agreement")
pursuant to which First Dodge, FNB, and MBI would be merged into Fourth
Financial (the "Fourth Merger"), and the stockholders of First National
will also vote on a related merger agreement (the "BANK IV Kansas
Merger Agreement") pursuant to which First National would be merged
into BANK IV Kansas, National Association.
A copy of the Agreement with Exhibits "A", "B", "C", "E",
and "G" is attached to this Joint Proxy Statement-Prospectus as Annex
I. A copy of the BANK IV Kansas Merger Agreement is attached to the
Agreement as Exhibit "A", and a copy of the Fourth Merger Agreement is
attached to the Agreement as Exhibit "C".
This Joint Proxy Statement-Prospectus also pertains to the
aggregate of 662,220 shares of common stock, par value $5 per share
("Fourth Stock"), of Fourth Financial expected to be issued in
connection with the Fourth Merger and the BANK IV Kansas Merger.
Fourth Financial has filed a Registration Statement on Form
S-4 (including all exhibits and amendments thereto, the "Registration
Statement") with the Securities and Exchange Commission ("Commission")
pursuant to the Securities Act of 1933, as amended, covering the shares
of Fourth Stock to be issued in connection with the Fourth Merger and
the BANK IV Kansas Merger. This Joint Proxy Statement-Prospectus
constitutes both the Joint Proxy Statement of First Dodge, MBI, and
First National relating to the solicitation of proxies for use at the
Special Meetings and the Fourth Financial Prospectus filed as part of
the Registration Statement. All information contained herein with
respect to Fourth Financial and its subsidiaries has been provided by
Fourth Financial and all information herein with respect to First Dodge
and its subsidiaries has been provided by First Dodge. See "Available
Information". This Joint Proxy Statement-Prospectus is first being
sent to stockholders of First Dodge, MBI, and First National on or
about May 16, 1994.
The last reported sale price of Fourth Stock as reported on
the NASDAQ National Market System on May 11, 1994, was $____ per share.
There is no reported trading market for the common stock of First
Dodge, MBI, or First National.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT-
PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement-Prospectus is May 12, 1994.
No person is authorized to give any information or to make
any representation not contained in this Joint Proxy
Statement-Prospectus in connection with the matters contained in this
Joint Proxy Statement-Prospectus, and, if given or made, such
information should not be relied upon. This Joint Proxy
Statement-Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities other than the Fourth
Stock offered hereby. This Joint Proxy Statement-Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby, or the solicitation of a proxy, in any
jurisdiction to or from any person to or from whom it is unlawful to
make such offer, or solicitation of an offer, or proxy solicitation in
such jurisdiction. Neither the delivery of this Joint Proxy
Statement-Prospectus nor any distribution of the securities offered
pursuant to this Joint Proxy Statement-Prospectus shall, under any
circumstances, create an implication that there has been no change in
the affairs of Fourth Financial, First Dodge, MBI, or First National
since the date of this Joint Proxy Statement-Prospectus.
------------------
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TABLE OF CONTENTS
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Page
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Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
The Agreement and Proposed Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Pro Forma Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Information Concerning Fourth Financial . . . . . . . . . . . . . . . . . . . . . . . . .34
Information Concerning First Dodge, MBI, and First National . . . . . . . . . . . . . . .35
Description of Capital Stock of First Dodge, First National,
and MBI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Ownership of First Dodge, First National, and MBI Common Stock. . . . . . . . . . . . . .39
Market Prices of and Dividends on First Dodge Stock, First
National Stock, MBI Common Stock, and Fourth Stock. . . . . . . . . . . . . . . . . . .41
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Information Incorporated by Reference . . . . . . . . . . . . . . . . . . . . . . . . . .45
Deadline for Submission of Stockholders' Proposals for the 1995
Annual Meeting of Stockholders of Fourth Financial. . . . . . . . . . . . . . . . . . .46
Index to Financial Statements and Related Information . . . . . . . . . . . . . . . . . F-1
<FN>
Annex I - Agreement and Plan of Reorganization, dated as of February
2, 1994 with Exhibits "A", "B", "C", "E", and "G" attached
Annex II - Section 1091 of the Oklahoma General Corporation Act
Annex III - 12 U.S.C. Section 251a (b), (c), and (d)
</TABLE>
Available Information
This Joint Proxy Statement-Prospectus does not contain all of the
information set forth in the Registration Statement and exhibits
thereto which Fourth Financial has filed with the Commission under the
Securities Act of 1933 and to which reference is hereby made. Fourth
Financial is subject to the informational requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, files
reports, proxy statements, and other information with the Commission.
The Registration Statement, including the exhibits thereto, as well as
such reports, proxy statements, and other information filed by Fourth
Financial can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, Suite 1300, New York, New
York 10048 and at CitiCorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 except that copies of the exhibits may not be
available at certain of the Regional Offices. Copies of such material
can be obtained by mail from the Public Reference Section of the
Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE
DOCUMENTS ARE AVAILABLE UPON REQUEST. COPIES OF THESE DOCUMENTS
RELATING TO FOURTH FINANCIAL (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS
WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE) WILL BE PROVIDED
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
A JOINT PROXY STATEMENT-PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST OF WILLIAM J. RAINEY, SECRETARY, FOURTH FINANCIAL CORPORATION,
P.O. BOX 4, 100 NORTH BROADWAY, WICHITA, KANSAS 67201 (TELEPHONE NUMBER
(316) 292-5339). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY JUNE 8, 1994.
SUMMARY
The following is a brief summary of certain information with respect to
matters to be considered at the Special Meetings. This summary is
necessarily incomplete and is qualified in its entirety by the more
detailed information and financial statements and notes thereto
appearing elsewhere in this Joint Proxy Statement-Prospectus and in the
Annexes, the documents accompanying this Joint Proxy Statement-
Prospectus hereto, and the documents referred to herein, to which
reference is made for a complete statement of the matters discussed
below.
The Companies
FOURTH FINANCIAL
Fourth Financial Corporation ("Fourth Financial") is a bank
holding company incorporated under the laws of the State of Kansas.
Fourth Financial, headquartered in Wichita, Kansas, offers a broad
range of bank and bank-related services through its subsidiaries, BANK
IV Kansas, National Association ("BANK IV Kansas") and BANK IV
Oklahoma, National Association ("BANK IV Oklahoma"). Fourth Financial
is the largest bank holding company headquartered in Kansas. BANK IV
Kansas is the largest bank in Kansas and BANK IV Oklahoma is the third-
largest bank in Oklahoma. Fourth Financial's principal executive
offices are located at 100 North Broadway, P.O. Box 4, Wichita, Kansas
67201; its telephone number is (316) 292-5339.
FIRST DODGE
First Dodge City Bancshares, Inc ("First Dodge") is a bank
holding company incorporated under the laws of the State of Kansas.
Its principal assets are its ownership interests in First National
Bancshares of Dodge City, Inc. ("FNB"), Metro Bancshares, Inc. ("MBI"),
Metro Bank of Broken Arrow ("Metro Bank"), and First National Bank and
Trust Company in Dodge City ("First National"). First Dodge owns all
of the issued and outstanding capital stock of FNB. First Dodge owns
all of MBI's preferred stock and 99.56% of its issued and outstanding
common stock. First Dodge's executive offices are located at 619
Second Avenue, P.O. Box 59, Dodge City, Kansas 67801. Its telephone
number is (316) 227-8500.
MBI
Metro Bancshares, Inc., an Oklahoma corporation ("MBI"), is a
bank holding company which owns all of the issued and outstanding
capital stock of Metro Bank. MBI's principal executive offices are
located at 619 Second Avenue, P.O. Box 59, Dodge City, Kansas 67801.
Its telephone number is (316) 227-8500.
FIRST NATIONAL
First National Bank and Trust Company in Dodge City, a national
banking association ("First National"), is the largest of the three
banks in Dodge City, Kansas. FNB owns 87.78% of the issued and
outstanding capital stock of First National. First National's
principal executive offices are located at 619 Second Avenue, P.O. Box
59, Dodge City, Kansas 67801. Its telephone number is (316) 227-8500.
The Special Meetings
Times, Date, and Place
The Special Meeting of Stockholders of First Dodge (the "First
Dodge Special Meeting") will be held on June 15, 1994, at 9:50 a.m.,
Central Daylight Savings Time, at 619 Second Avenue, Dodge City,
Kansas. See "The Special Meetings."
The Special Meeting of Stockholders of First National (the "First
National Special Meeting") will be held on June 15, 1994, at 10:00
a.m., Central Daylight Savings Time, at 619 Second Avenue, Dodge City,
Kansas. See "The Special Meetings."
The Special Meeting of Stockholders of MBI (the "MBI Special
Meeting") will be held on June 15, 1994, at 11:00 a.m., Central
Daylight Savings Time, at 619 Second Avenue, Dodge City, Kansas. See
"The Special Meetings."
Purpose of the Special Meetings
First Dodge Special Meeting. The First Dodge Special Meeting has
been called to consider and vote upon an Agreement and Plan of
Reorganization, dated as of February 2, 1994 (the "Agreement"), among
First Dodge, FNB, First National, MBI, Metro Bank, the stockholders of
First Dodge, and Fourth Financial and the related Agreement of Merger
among First Dodge, FNB, MBI, and Fourth Financial (the "Fourth Merger
Agreement"), which provide for the merger of First Dodge, FNB, and MBI
into Fourth Financial (the "Fourth Merger").
MBI Special Meeting. The MBI Special Meeting has also been
called to consider and vote upon the Agreement and the Fourth Merger
Agreement. The Agreement also provides for the merger of Metro Bank
into BANK IV Oklahoma (the "BANK IV Oklahoma Merger") pursuant to a
related Agreement to Merge (the "BANK IV Oklahoma Merger Agreement").
First National Special Meeting. The First National Special
Meeting has been called to consider and vote upon the Agreement and a
related Agreement to Merge between First National and BANK IV Kansas
(the "BANK IV Kansas Merger Agreement") pursuant to which First
National would be merged into BANK IV Kansas (the "BANK IV Kansas
Merger").
The BANK IV Kansas Merger and the BANK IV Oklahoma Merger are
sometimes collectively referred to herein as the "Bank Mergers"; the
Bank Mergers and the Fourth Merger are sometimes collectively referred
to herein as the "Mergers"; and the Fourth Merger Agreement, the BANK
IV Kansas Merger Agreement, and the BANK IV Oklahoma Merger Agreement
are sometimes collectively referred to as the "Merger Agreements."
Vote Required for the Mergers
First Dodge. The affirmative vote of the holders of at least a
majority of the outstanding First Dodge common stock, par value $1.00
per share ("First Dodge Stock"), is required to approve the Agreement
and the Fourth Merger Agreement. All of the three stockholders of
First Dodge ("First Dodge Stockholders") have executed the Agreement
and have agreed to vote all of their shares of First Dodge Stock in
favor of the Agreement and the Fourth Merger Agreement, so approval of
the Agreement and the Fourth Merger Agreement at the First Dodge
Special Meeting is assured.
MBI. The affirmative vote of the holders of at least a majority
of the issued and outstanding MBI common stock, par value $.10 per
share ("MBI Common Stock") is required to approve the Agreement and the
Fourth Merger Agreement. First Dodge, which owns 99.56% of the issued
and outstanding MBI Common Stock and all of MBI's outstanding preferred
stock, has agreed to vote all of the MBI Common Stock owned by it in
favor of the Agreement and the Fourth Merger Agreement, so approval of
the Agreement and the Fourth Merger Agreement at the MBI Special
Meeting is assured. The holder of MBI's preferred stock does not have
the right to vote at the Special Meetings.
First National. The affirmative vote of the holders of at least
two-thirds of the issued and outstanding First National common stock,
par value $100 per share ("First National Stock") is required to
approve the Agreement and the BANK IV Kansas Merger Agreement. FNB,
which owns 87.78% of the issued and outstanding First National Stock,
has agreed to vote all of such stock in favor of the Agreement and the
BANK IV Kansas Merger Agreement, so approval of the Agreement and the
BANK IV Kansas Merger Agreement at the First National Special Meeting
is assured. As of the date hereof, the executive officers and
directors of First National and their affiliates beneficially own an
aggregate of 115 shares or 1.92% of the issued and outstanding First
National Stock in addition to the shares held by FNB, which they also
beneficially own.
No executive officer or director of Fourth Financial or any of
their affiliates beneficially owns any First Dodge Stock, MBI Common
Stock, or First National Stock.
Appraisal Rights
The stockholders of MBI and First National have the right to
dissent from the Mergers and have their shares of stock appraised and
to receive cash payment for the fair value of such shares. The
dissenters' rights normally available to stockholders under Kansas law
are not available to the First Dodge Stockholders because they have
executed the Agreement and have thereby agreed to vote their shares in
favor of the Agreement and the Fourth Merger Agreement. See "The
Agreement and Proposed Mergers -- Appraisal Rights of Dissenting
Stockholders".
The Mergers
The basic purpose of the Agreement is to provide a means for
Fourth Financial to acquire 100% of the issued and outstanding capital
stock of First National and Metro Bank. The parties have concluded
that the most feasible way of accomplishing that objective in a manner
that would afford favorable income tax treatment to stockholders of
First Dodge, MBI, and First National as to the shares of Fourth Stock
they would receive in the acquisition is to provide for the merger of
First Dodge, FNB, and MBI into Fourth Financial and the concurrent
mergers of First National into BANK IV Kansas and of Metro Bank into
BANK IV Oklahoma. None of such mergers will be effected unless all
three are effected.
Terms of the Mergers
First Dodge. In the Fourth Merger, each issued and outstanding
share of First Dodge Stock will be converted into the right to receive
112.42 shares of Fourth Stock.
MBI. In the Fourth Merger, each issued and outstanding share of
MBI Common Stock not owned by First Dodge will be converted into the
right to receive 0.30 shares of Fourth Stock.
First National. In the BANK IV Kansas Merger, each issued and
outstanding share of First National Stock not owned by FNB will be
converted into the right to receive 95.92 shares of Fourth Stock.
Federal Income Tax Consequences
Stockholders of First Dodge, MBI, and First National will not
realize gain or loss for federal income tax purposes upon consummation
of the Mergers except to the extent they receive cash payments as a
consequence of the Mergers in lieu of receipt of fractional shares.
Neither First Dodge, MBI, First National, nor Fourth Financial has
requested a ruling from the Internal Revenue Service as to the tax
consequences of the Mergers. See "The Agreement and Proposed Mergers
- -- Federal Income Tax Consequences".
Regulatory Approvals
An application for the required approval of the Comptroller of
the Currency has been filed. It is expected that such approval will be
granted on about May 27, 1994, and that the statutory 30-day waiting
period for antitrust review by the United States Department of Justice
will expire on about June 26, 1994. An application has also been made
with the Board of Governors of the Federal Reserve System for a waiver
from the filing requirements under the federal Bank Holding Company
Act. It is anticipated that such waiver will be granted on May 12,
1994.
Recommendation of Boards of Directors of First Dodge, MBI, and First
National
The respective Boards of Directors of First Dodge, MBI, and First
National have each unanimously concluded that the Mergers are in the
best interests of their respective stockholders and recommend that
First Dodge, MBI, and First National stockholders vote FOR approval of
the Agreement and the Merger Agreements. See "The Agreement and
Proposed Mergers -- Recommendations of the Boards of Directors; Reasons
for the Mergers".
Accounting Treatment
It is anticipated that the issuance of Fourth Stock to First
Dodge Stockholders will be treated as a "pooling of interests" for
accounting and financial reporting purposes. The issuance of Fourth
Stock to acquire the minority interests of MBI and First National not
owned by First Dodge or its subsidiary, FNB, will be accounted for as
purchases as of the date of acquisition.
Pending Acquisitions
In addition to the proposed acquisitions of First National and
Metro Bank, Fourth Financial has entered into agreements to acquire a
Missouri savings association, a bank headquartered in Hutchinson,
Kansas, and a savings association located in Oklahoma City, Oklahoma.
In addition, it has agreements in principle to acquire a savings
association located in Stillwater, Oklahoma and a bank located in
Blackwell, Oklahoma. See "Information Concerning Fourth Financial-
Pending Acquisitions."
Interim Earnings
Fourth Financial's unaudited net income for the first quarter of
1994 was $20.2 million compared to $24.2 million in the first quarter
of 1993 when the cumulative effect of adopting a new principle for
accounting for income taxes added $10.5 million to net income. Income
before the cumulative effect of the change in accounting principle for
the first quarter of 1994 was $20.2 million, 47.6% higher than the
$13.7 million recorded in the same quarter of 1993. Fully diluted
earnings per share on income before the cumulative effect of the change
in accounting principle were $.68 and $.46 for the first quarters of
1994 and 1993, respectively. Fully diluted earnings per share on net
income were $.68 and $.81 for the comparable quarters.
The following table shows the unaudited results of operations for
the quarter ended March 31, 1994 and 1993 for First Dodge, MBI, and
First National:
<TABLE>
<CAPTION>
First Dodge MBI First National
------------------- --------------- -----------------
1994 1993 1994 1993 1994 1993
------- ------- ------ ------ ------ ------
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $ (1,672) $ 367 $(637) $113 $ 194 $ 377
Earnings (loss) per share (318.20) 69.84 (.70) .12 32.33 62.84
</TABLE>
Included in the results of operations for the first three
monthsof 1994 are nonoperating charges for severance payments, data
processing contract settlements and conversions, the write down of
duplicate or obsolete facilities, and other similar charges and a
charge of $1,100,000 at First Dodge and $571,000 (net of a $24,000 tax
benefit) at MBI to accelerate the amortization of intangible assets.
The amounts of these nonoperating charges by company are detailed int
he following table.
First Dodge MBI First National
----------- ------ --------------
(Dollars in thousand except per share amounts)
Nonoperating charge
Included in net
income (loss) $2,603 $ 911 $ 314
Tax benefit 586 129 120
------ ----- -----
Net nonoperating
charge $2,017 $ 782 $ 194
===== ===== =====
Nonoperating charge
effect on earnings
(loss) per share $383.86 $ .86 $32.33
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Fourth Financial Corporation
Year Ended
December 31,
------------------------------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(In thousands, except per share data)
(1) (1) (1) (1) (1)
<S> <C> <C> <C> <C> <C>
Interest income. . . . . . . . . . . . . . . $ 433,467 $ 427,119 $ 479,568 $ 471,191 $ 402,947
Net interest income. . . . . . . . . . . . . 257,966 234,722 208,359 178,536 159,712
Provision for credit losses. . . . . . . . . 7,056 21,343 43,665 49,000 27,397
Net income . . . . . . . . . . . . . . . . . 75,691 63,306 32,109 9,092 21,425
Net income applicable to common and
common-equivalent shares. . . . . . . . . . 68,691 57,355 32,109 9,092 21,425
Period-end assets. . . . . . . . . . . . . . 6,742,873 6,568,782 5,627,798 5,763,227 4,664,372
Period-end long-term debt. . . . . . . . . . 13,989 29,340 47,105 18,798 28,207
Per common share data:
Primary earnings per common share:
Before extraordinary items and cumulative
effect of change in accounting principle 2.26 2.17 1.26 .23 1.00
Extraordinary items and cumulative effect
of a change in accounting principle . . .41 .10 .06 .18 --
Applicable to common and
common-equivalent shares. . . . . . . . 2.67 2.27 1.32 .41 1.00
Fully diluted earnings per common share:
Before extraordinary items and cumulative
effect of change in accounting principle 2.19 2.11 1.23 .23 1.00
Extraordinary items and cumulative effect
of a change in accounting principle . . .35 .08 .05 .17 --
Net income . . . . . . . . . . . . . . . 2.54 2.19 1.28 .40 1.00
Common dividend (2). . . . . . . . . . . . .98 .88 .88 .88 .82
Book value at period-end . . . . . . . . . 18.83 16.74 15.39 14.80 15.47
<FN>
- ------------
(1) Notes 2 and 3 of the Notes to the Fourth Financial 1993 and 1992 Consolidated Financial Statements describe
the business combinations and deposit assumption transactions completed during 1993, 1992, and 1991. Prior
year financial statements have been restated to reflect poolings of interests consummated in 1993. During
1990, Fourth Financial assumed core deposits totaling $937.1 million and purchased loans totaling $244.8
million.
(2) Historical dividends declared without adjustment for poolings of interests.
</TABLE>
Market value of Common Stock
on day preceding announcement
of proposed merger
(November 17, 1993). . . . . $27.00 per share
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA (Cont'd.)
First Dodge City Bancshares, Inc.
Year Ended
December 31,
------------------------------------------------------------------------------------
1993 1992 1991(2) 1990(1) 1989
----- ----- ----- ----- -----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Interest income. . . . . . . $ 10,602 $ 11,961 $ 12,468 $ 11,002 $ 11,133
Net interest income. . . . . 6,476 6,697 5,396 4,587 4,597
Provision (benefit)
for credit losses . . . . . (92) 15 261 527 929
Net income (loss). . . . . . 1,601 1,894 1,054 112 (32)
Period-end assets. . . . . . 151,349 153,259 162,757 135,961 118,650
Period-end long-term debt. . 6,295 6,732 6,243 5,089 4,530
Per common share data:
Earnings (loss)
per common share:
Before extraordinary item and
cumulative effect of a change
in accounting principle 290.80 335.71 200.59 21.32 (6.09)
Extraordinary item and
cumulative effect of a change
in accounting principle 13.89 24.74 -- -- --
Net income . . . . . . . 304.69 360.45 200.59 21.32 (6.09)
Common dividend. . . . . . 132.08 142.73 19.03 14.27 31.16
Book value at period-end . 1,618.42 1,445.81 1,241.41 1,080.22 1,073.37
<FN>
- ------------
(1) During 1990, First National assumed core deposits totaling $13,768,000 in the purchase of a failed savings
and loan.
(2) During 1991, Metro Bank assumed core deposits totaling $18,459,000 and loans totaling $10,921,000 in the purchase
of a failed savings and loan.
</TABLE>
Market value of Common Stock
on day preceding announcement
of proposed merger
(November 17, 1993)
Historical . . . . . . . . . No quoted market price
Equivalent . . . . . . . . . $3,035.34 per share
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA (Cont'd.)
Metro Bancshares, Inc.
Year Ended
December 31,
--------------------------------------------------------------------------------
1993 1992 1991(1) 1990 1989
----- ----- ------- ----- -----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Interest income. . . . . . . . . . $ 3,206 $ 3,606 $ 2,735 $ 1,588 $ 1,665
Net interest income. . . . . . . . 2,060 2,247 1,255 702 647
Provision for credit losses. . . . 30 160 141 234 569
Net income (loss). . . . . . . . . 510 678 137 (407) (769)
Net income (loss) applicable
to common stock . . . . . . . . . -- 328 137 (407) (769)
Period-end assets. . . . . . . . . 45,306 36,883 38,721 19,566 19,664
Period-end long-term debt. . . . . 44 44 44 44 44
Per common share data:
Earnings (loss) per common share:
Before extraordinary item. . . -- .22 .15 (.45) (.85)
Extraordinary item . . . . . . -- .14 -- -- --
Net income . . . . . . . . . . -- .36 .15 (.45) (.85)
Common dividend. . . . . . . . . -- -- -- -- --
Book value at period-end . . . . 3.10 3.10 2.73 2.57 2.52
<FN>
- -------------
(1) During 1991, Metro Bank assumed core deposits totaling $18,459,000 and loans totaling $10,921,000 in the
purchase of a failed savings and loan.
</TABLE>
Market value of Common Stock
on day preceding announcement
of proposed merger
(November 17, 1993)
Historical . . . . . . . . . No quoted market price
Equivalent . . . . . . . . . $8.10 per share
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA (Cont'd.)
First National Bank and Trust Company in Dodge City
Year Ended
December 31,
-------------------------------------------------------------------------------
1993 1992 1991 1990(1) 1989
---- ---- ---- ------- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Interest income. . . . . . . . . . $ 7,372 $ 8,327 $ 9,710 $ 9,393 $ 9,446
Net interest income. . . . . . . . 4,807 4,845 4,635 4,347 4,443
Provision (benefit) for credit losses (122) (145) 120 89 360
Net income . . . . . . . . . . . . 1,632 1,672 1,503 1,356 1,347
Period-end assets. . . . . . . . . 104,790 115,020 122,548 114,854 97,855
Period-end long-term debt. . . . . -- -- 138 262 373
Per common share data:
Earnings per common share:
Before cumulative effect of a
change in accounting principle 259.83 278.67 250.50 226.00 224.50
Cumulative effect of a change
in accounting principle . . . 12.17 -- -- -- --
Net income . . . . . . . . . . 272.00 278.67 250.50 226.00 224.50
Common dividend. . . . . . . . . 255.83 216.67 234.17 210.83 204.17
Book value at period-end . . . . 1,532.00 1,515.83 1,453.83 1,437.50 1,422.33
<FN>
- -----------
(1) During 1990, First National assumed core deposits totaling $13,768,000 in the purchase of a failed savings
and loan.
</TABLE>
Market value of Common Stock
on day preceding announcement
of proposed merger
(November 17, 1993)
Historical . . . . . . . . . No quoted market price
Equivalent . . . . . . . . . $2,589.84 per share
<TABLE>
<CAPTION>
COMPARATIVE PER SHARE DATA
APPLICABLE TO FIRST DODGE SHAREHOLDERS
Pro Forma Fourth Financial and First Dodge
Year Ended December 31,
---------------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Primary earnings before extraordinary item
and a change in accounting principle:
Fourth Financial historical. . . . . . . . . . . $ 2.26 $ 2.17 $ 1.26
Fourth Financial pro forma (1) . . . . . . . . . 2.27 2.19 1.27
First Dodge historical . . . . . . . . . . . . . 290.80 335.71 200.59
First Dodge pro forma (2). . . . . . . . . . . . 255.19 246.20 142.77
Fully diluted earnings before extraordinary
item and a change in accounting principle:
Fourth Financial historical. . . . . . . . . . . $ 2.19 $ 2.11 $ 1.23
Fourth Financial pro forma (1) . . . . . . . . . 2.20 2.13 1.24
First Dodge historical . . . . . . . . . . . . . 290.80 335.71 200.59
First Dodge pro forma (2). . . . . . . . . . . . 247.32 239.45 139.40
Common dividend:
Fourth Financial historical . . . . . . . . . . $ .98 $ .88 $ .88
First Dodge historical . . . . . . . . . . . . . 132.08 142.73 19.03
Historical pro forma equivalent (3). . . . . . . 110.17 98.93 98.93
Book value per share of common stock:
Fourth Financial historical. . . . . . . . . . . $ 18.83
Fourth Financial pro forma (1) . . . . . . . . . 18.76
First Dodge historical . . . . . . . . . . . . . 1,618.42
First Dodge pro forma (2). . . . . . . . . . . . 2,109.00
<FN>
__________________
(1) Pro forma data includes the combination of Fourth Financial and First Dodge.
(2) Pro forma data multiplied by the number of shares of Fourth Stock expected to be received for each share
of First Dodge Stock.
(3) Fourth Financial historical dividends multiplied by the number of shares of Fourth Stock expected to be
received for each share of First Dodge Stock.
</TABLE>
<TABLE>
<CAPTION>
COMPARATIVE PER SHARE DATA
APPLICABLE TO MBI COMMON SHAREHOLDERS
Pro Forma Fourth Financial and First Dodge
Year Ended December 31,
----------------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Primary earnings before extraordinary item
and a change in accounting principle:
Fourth Financial historical. . . . . . . . . . . $ 2.26 $ 2.17 $ 1.26
Fourth Financial pro forma (1) . . . . . . . . . 2.27 2.19 1.27
MBI historical . . . . . . . . . . . . . . . . . -- .22 .15
MBI pro forma (2). . . . . . . . . . . . . . . . .68 .66 .38
Fully diluted earnings before extraordinary
item and a change in accounting principle:
Fourth Financial historical. . . . . . . . . . . $ 2.19 $ 2.11 $ 1.23
Fourth Financial pro forma (1) . . . . . . . . . 2.20 2.13 1.24
MBI historical . . . . . . . . . . . . . . . . . -- .22 .15
MBI pro forma (2). . . . . . . . . . . . . . . . .66 .64 .37
Common dividend:
Fourth Financial historical . . . . . . . . . . $ .98 $ .88 $ .88
MBI historical . . . . . . . . . . . . . . . . . -- -- --
Historical pro forma equivalent (3). . . . . . . .29 .26 .26
Book value per share of common stock:
Fourth Financial historical. . . . . . . . . . . $ 18.83
Fourth Financial pro forma (1) . . . . . . . . . 18.76
MBI historical . . . . . . . . . . . . . . . . . 3.10
MBI pro forma (2). . . . . . . . . . . . . . . . 5.63
<FN>
__________________
(1) Pro forma data includes the combination of Fourth Financial and First Dodge.
(2) Pro forma data multiplied by the number of shares of Fourth Stock expected to be received for each share
of MBI Common Stock.
(3) Fourth Financial historical dividends multiplied by the number of shares of Fourth Stock expected to be
received for each MBI Common Stock.
</TABLE>
<TABLE>
<CAPTION>
COMPARATIVE PER SHARE DATA
APPLICABLE TO FIRST NATIONAL SHAREHOLDERS
Pro Forma Fourth Financial and First Dodge
Year Ended December 31,
---------------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Primary earnings before extraordinary item
and a change in accounting principle:
Fourth Financial historical. . . . . . . . . . . $ 2.26 $ 2.17 $ 1.26
Fourth Financial pro forma (1) . . . . . . . . . 2.27 2.19 1.27
First National historical . . . . . . . . . . . 259.83 278.67 250.50
First National pro forma (2) . . . . . . . . . . 217.74 210.06 121.82
Fully diluted earnings before extraordinary
item and a change in accounting principle:
Fourth Financial historical. . . . . . . . . . . $ 2.19 $ 2.11 $ 1.23
Fourth Financial pro forma (1) . . . . . . . . . 2.20 2.13 1.24
First National historical . . . . . . . . . . . 259.83 278.67 250.50
First National pro forma (2) . . . . . . . . . . 211.02 204.31 118.94
Common dividend:
Fourth Financial historical . . . . . . . . . . $ .98 $ .88 $ .88
First National historical . . . . . . . . . . . 255.83 216.67 234.17
Historical pro forma equivalent (3). . . . . . . 94.00 84.41 84.41
Book value per share of common stock:
Fourth Financial historical. . . . . . . . . . . $ 18.83
Fourth Financial pro forma (1) . . . . . . . . . 18.76
First National historical . . . . . . . . . . . 1,532.00
First National pro forma (2) . . . . . . . . . . 1,799.46
<FN>
__________________
(1) Pro forma data includes the combination of Fourth Financial and First Dodge.
(2) Pro forma data multiplied by the number of shares of Fourth Stock expected to be received for each share
of First National Stock.
(3) Fourth Financial historical dividends multiplied by the number of shares of Fourth Stock expected to be
received for each share of First National Stock.
</TABLE>
<TABLE>
<CAPTION>
COMPARATIVE PER SHARE DATA
APPLICABLE TO FIRST DODGE SHAREHOLDERS
Pro Forma Fourth Financial, First Dodge, and Pending Acquisitions
Year Ended December 31,
--------------------------------------------------------------------
Emprise Emprise, Equity,
and Equity and GSB GSB GSB
Transactions Transactions Transaction Transaction
1993 1993 1992 1991
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary earnings before extraordinary item
and a change in accounting principle:
Fourth Financial historical. . . . . . . . . $ 2.26 $ 2.26 $ 2.17 $ 1.26
Fourth Financial pro forma (1) . . . . . . . 2.35 2.32 2.12 1.26
First Dodge historical . . . . . . . . . . . 290.80 290.80 335.71 200.59
First Dodge pro forma (2). . . . . . . . . . 264.19 260.81 238.33 141.65
Fully diluted earnings before extraordinary
item and a change in accounting principle:
Fourth Financial historical. . . . . . . . . $ 2.19 $ 2.19 $ 2.11 1.23
Fourth Financial pro forma (1) . . . . . . . 2.27 2.25 2.07 1.23
First Dodge historical . . . . . . . . . . . 290.80 290.80 335.71 200.59
First Dodge pro forma (2). . . . . . . . . . 255.19 252.95 232.71 138.28
Common dividend:
Fourth Financial historical . . . . . . . . $ .98 $ .98 $ .88 $ .88
First Dodge historical . . . . . . . . . . . 132.08 132.08 142.73 19.03
Historical pro forma equivalent (3). . . . . 110.17 110.17 98.93 98.93
Book value per share of common stock:
Fourth Financial historical. . . . . . . . . $ 18.83 $ 18.83
Fourth Financial pro forma (1) . . . . . . . 18.76 19.00
First Dodge historical . . . . . . . . . . . 1,618.42 1,618.42
First Dodge pro forma (2). . . . . . . . . . 2,109.00 2,135.98
<FN>
__________________
(1) Pro forma data includes the combination of Fourth Financial and the pending acquisitions of First Dodge,
Emprise Bank, National Association ("Emprise"), Equity Bank for Savings, F.A. ("Equity"), and Great
Southern Bancorp, Inc. ("GSB").
(2) Pro forma data multiplied by the number of shares of Fourth Stock expected to be received for each share of
First Dodge Stock.
(3) Fourth Financial historical dividends multiplied by the number of shares of Fourth Stock expected to be
received for each share of First Dodge Stock.
</TABLE>
<TABLE>
<CAPTION>
COMPARATIVE PER SHARE DATA
APPLICABLE TO MBI COMMON SHAREHOLDERS
Pro Forma Fourth Financial, First Dodge, and Pending Acquisitions
Year Ended December 31,
-------------------------------------------------------------------
Emprise Emprise, Equity,
and Equity and GSB GSB GSB
Transactions Transactions Transaction Transaction
1993 1993 1992 1991
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary earnings before extraordinary item
and a change in accounting principle:
Fourth Financial historical. . . . . . . . . $ 2.26 $ 2.26 $ 2.17 $ 1.26
Fourth Financial pro forma (1) . . . . . . . 2.35 2.32 2.12 1.26
MBI historical . . . . . . . . . . . . . . . -- -- .22 .15
MBI pro forma (2). . . . . . . . . . . . . . .71 .70 .64 .38
Fully diluted earnings before extraordinary
item and a change in accounting principle:
Fourth Financial historical. . . . . . . . . $ 2.19 $ 2.19 $ 2.11 $ 1.23
Fourth Financial pro forma (1) . . . . . . . 2.27 2.25 2.07 1.23
MBI . . . . . . . . . . . . . . . . . . . . -- -- .22 .15
MBI pro forma (2). . . . . . . . . . . . . . .68 .68 .62 .37
Common dividend:
Fourth Financial historical . . . . . . . . $ .98 $ .98 $ .88 $ .88
MBI historical . . . . . . . . . . . . . . . -- -- -- --
Historical pro forma equivalent (3). . . . . .29 .29 .26 .26
Book value per share of common stock:
Fourth Financial historical. . . . . . . . . $ 18.83 $ 18.83
Fourth Financial pro forma (1) . . . . . . . 18.76 19.00
MBI historical . . . . . . . . . . . . . . . 3.10 3.10
MBI pro forma (2). . . . . . . . . . . . . . 5.63 5.70
<FN>
__________________
(1) Pro forma data includes the combination of Fourth Financial and the pending acquisitions of First Dodge,
Emprise, Equity, and GSB.
(2) Pro forma data multiplied by the number of shares of Fourth Stock expected to be received for each share of
MBI Common Stock.
(3) Fourth Financial historical dividends multiplied by the number of shares of Fourth Stock expected to be
received for each share of MBI Common Stock.
</TABLE>
<TABLE>
<CAPTION>
COMPARATIVE PER SHARE DATA
APPLICABLE TO FIRST NATIONAL SHAREHOLDERS
Pro Forma Fourth Financial, First Dodge, and Pending Acquisitions
Year Ended December 31,
-------------------------------------------------------------------
Emprise Emprise, Equity,
and Equity and GSB GSB GSB
Transactions Transactions Transaction Transaction
1993 1993 1992 1991
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary earnings before extraordinary item
and a change in accounting principle:
Fourth Financial historical. . . . . . . . . $ 2.26 $ 2.26 $ 2.17 $ 1.26
Fourth Financial pro forma (1) . . . . . . . 2.35 2.32 2.12 1.26
First National historical . . . . . . . . . 259.83 259.83 278.67 250.50
First National pro forma (2) . . . . . . . . 225.41 222.53 203.35 120.86
Fully diluted earnings before extraordinary
item and a change in accounting principle:
Fourth Financial historical. . . . . . . . . $ 2.19 $ 2.19 $ 2.11 $ 1.23
Fourth Financial pro forma (1) . . . . . . . 2.27 2.25 2.07 1.23
First National historical . . . . . . . . . 259.83 259.83 278.67 250.50
First National pro forma (2) . . . . . . . . 217.74 215.82 198.55 117.98
Common dividend:
Fourth Financial historical . . . . . . . . $ .98 $ .98 $ .88 $ .88
First National historical . . . . . . . . . 255.83 255.83 216.67 234.17
Historical pro forma equivalent (3). . . . . 94.00 94.00 84.41 84.41
Book value per share of common stock:
Fourth Financial historical. . . . . . . . . $ 18.83 $ 18.83
Fourth Financial pro forma (1) . . . . . . . 18.76 19.00
First National historical . . . . . . . . . 1,532.00 1,532.00
First National pro forma (2) . . . . . . . . 1,799.46 1,822.48
<FN>
__________________
(1) Pro forma data includes the combination of Fourth Financial and the pending acquisitions of First Dodge,
Emprise, Equity, and GSB.
(2) Pro forma data multiplied by the number of shares of Fourth Stock expected to be received for each share of
First National Stock.
(3) Fourth Financial historical dividends multiplied by the number of shares of Fourth Stock expected to be
received for each First National Stock.
</TABLE>
THE SPECIAL MEETINGS
General
This Joint Proxy Statement-Prospectus is being furnished to
holders of First Dodge Stock, MBI Common Stock, and First National
Stock in connection with the solicitation of proxies by the First
Dodge, MBI, and First National Boards of Directors for use at the
Special Meetings, to be held on June 15, 1994, and any adjournments or
postponements thereof, to consider and vote upon the approval and
adoption of the Agreement and the related Merger Agreements and the
transactions contemplated thereby, and to transact such other business
as may properly come before the Special Meetings or any adjournments or
postponements thereof.
Voting and Revocation of Proxies
Only First Dodge, MBI, and First National stockholders of record
at the close of business on May 11, 1994, will be entitled to notice of
or to vote at the Special Meetings. At the close of business on such
date, there were 5,254.5 shares of First Dodge Stock, 904,795 shares
of MBI Common Stock, and 6,000 shares of First National Stock
outstanding and entitled to be voted at the meeting. The preferred
stock of MBI is not entitled to be voted at the MBI Special Meeting.
As of May 1, 1994, there were three record holders of First Dodge
Stock, two record holders of MBI Common Stock, and 25 record holders of
First National Stock. The holders of First Dodge Stock, MBI Common
Stock, and First National Stock are all entitled to one vote per share
at the Special Meetings.
The affirmative votes by the holders of at least a majority of
the issued and outstanding First Dodge Stock and of at least a majority
of the issued and outstanding MBI Common Stock are required to approve
the Agreement and the Fourth Merger Agreement. The affirmative vote of
the holders of at least two-thirds of the issued and outstanding First
National Stock is required to approve the Agreement and the BANK IV
Kansas Merger Agreement. Approval and adoption of the Agreement and
the related Fourth Merger Agreement or BANK IV Kansas Merger Agreement
and the related transactions are being submitted as a single proposal
at each of the Special Meetings and may not be voted upon other than as
a single proposal. The required approval of the Agreement and the
Fourth Merger Agreement by the sole stockholder of FNB, First Dodge,
has already been obtained.
All of the stockholders of First Dodge have executed the
Agreement and have agreed to vote all of their shares of First Dodge
Stock in favor of the Agreement and the Fourth Merger Agreement. First
Dodge has agreed to vote all of the shares of MBI Common Stock owned by
it (99.56% of the outstanding shares) in favor of the Agreement and the
Fourth Merger Agreement, and FNB has agreed to vote all of the shares
of First National Stock owned by it (87.78% of the outstanding shares)
in favor of the Agreement and the BANK IV Kansas Merger Agreement.
Accordingly, approval of the Agreement and all of the Merger Agreements
at all three of the Special Meetings is assured.
Shares represented by properly executed proxies will, unless such
proxies have been revoked, be voted at the Special Meetings in
accordance with the instructions indicated on such proxies. In the
absence of instructions to the contrary, such shares will be voted FOR
approval and adoption of the Agreement and the related Merger
Agreement, and in the discretion of the proxy holders as to any other
matter which may properly come before the Special Meetings. None of
First Dodge, MBI, nor First National anticipates that any other matters
will come before the Special Meetings.
A stockholder who has given a proxy may revoke it at any time
prior to its exercise at the Special Meeting by giving written notice
of revocation, giving a duly executed proxy bearing a later date to the
Secretary of First Dodge, MBI, or First National, as the case may be,
or revoking the proxy and voting in person at the Special Meeting.
Attendance at a Special Meeting will not in and of itself constitute a
revocation of a proxy.
THE AGREEMENT AND PROPOSED MERGERS
General
The descriptions of the Agreement and the Merger Agreements
contained in this Joint Proxy Statement-Prospectus are qualified in
their entirety by reference to such agreements, the full texts of which
are contained in Annex I to this Joint Proxy Statement-Prospectus and
are incorporated herein by reference.
The Agreement and the Merger Agreements have been approved by the
Boards of Directors of Fourth Financial, First Dodge, FNB, MBI, and
First National. Although approval of the Agreement and the Merger
Agreements by the stockholders of First Dodge, FNB, MBI, and First
National is required, Fourth Financial does not need to obtain approval
of its stockholders to consummate the Agreement and the Merger
Agreements. The Bank Merger Agreements have been approved by the
Boards of Directors and stockholders of BANK IV Kansas, BANK IV
Oklahoma, and Metro Bank and by the Board of Directors of First
National.
The Agreement provides for three simultaneous mergers (the
"Mergers"): the merger of First Dodge, FNB, and MBI into Fourth
Financial; the merger of First National into BANK IV Kansas; and the
merger of Metro Bank into BANK IV Oklahoma. Upon consummation of the
three Mergers, First Dodge, FNB, MBI, First National, and Metro Bank
will all cease to exist separately. The time and date on which the
Mergers will be consummated is referred to herein and in the Agreement
as the "Effective Time".
Background of the Mergers
Senior management officials of Fourth Financial and First Dodge
first began discussing the possible acquisition of First Dodge and its
subsidiaries by Fourth Financial in July of 1993. Following various
negotiations, a letter of intent was executed and delivered by First
Dodge and Fourth Financial on November 17, 1993 and, after further
negotiations on several matters, the Agreement was executed and
delivered on February 2, 1994.
Recommendation of the Boards of Directors; Reasons for the Mergers
In deciding to enter into the Agreement, the First Dodge
Stockholders and the Boards of Directors of First Dodge, MBI, and First
National, after consultation with legal counsel and considering various
alternatives and the outlook for independent banks in southwest Kansas
and in Oklahoma, concluded that the Agreement was in the best interests
of First Dodge, MBI, and First National and their respective
stockholders because it will permit stockholders to exchange on
favorable terms their ownership interests in First Dodge, MBI, and
First National for participation in the ownership of a substantially
larger enterprise operating a multistate banking system whose shares
are publicly traded. See "The Agreement and Proposed Mergers--
Interests of Mr. Harding in the Mergers" for more information
concerning the interests of John V. Harding, Chairman of the Board of
First Dodge and First National and President and a director of MBI, in
the Mergers.
Among the factors considered by the First Dodge Stockholders and
the Boards of Directors of First Dodge, MBI, and First National in
deciding to approve and recommend the terms of the Agreement were the
respective earnings and dividend records, financial conditions,
historical stock prices, managements, and assets and liabilities of
First Dodge, MBI, and First National, on the one hand, and of Fourth
Financial, on the other hand, and the outlook for each in their
respective markets.
The foregoing discussion of the information and factors
considered and given weight by the First Dodge, MBI, and First National
Boards of Directors and the First Dodge Stockholders is not intended to
be exhaustive but is believed to include all material factors
considered by the Boards of Directors and the First Dodge Stockholders.
In reaching a determination to approve and recommend the Agreement and
the Merger Agreements, the First Dodge Stockholders and the First
Dodge, MBI, and First National Boards did not expressly assign any
relative or specific weights to any of the foregoing factors and
individual directors or individual First Dodge Stockholders may have
given differing weights to different factors. The First Dodge, MBI,
and First National Boards of Directors are, however, unanimous in their
respective recommendations to the holders of First Dodge Stock, MBI
Common Stock, and First National Stock that the Agreement and the
Merger Agreements be approved.
The Boards of Directors of First Dodge, MBI, and First National
have each unanimously approved the Agreement and the transactions
contemplated thereby and recommend that First Dodge, MBI, and First
National stockholders vote FOR approval and adoption of the Agreement
and the related Merger Agreements.
The Board of Directors of Fourth Financial approved the Agreement
because it concluded that the expansion of Fourth Financial's
operations into Dodge City and Broken Arrow was desirable and in the
best interests of Fourth Financial's stockholders.
Exchange Ratios
Fourth Merger. Upon consummation of the Fourth Merger, all of
the shares of First Dodge Stock and MBI Common Stock outstanding at the
time the Fourth Merger is effected will cease to exist, and each share
of First Dodge Stock will automatically be converted into the right to
receive 112.42 shares of Fourth Stock, and each share of MBI Common
Stock not owned by First Dodge will automatically be converted into the
right to receive 0.30 shares of Fourth Stock.
BANK IV Kansas Merger. Upon consummation of the BANK IV Kansas
Merger, all of the shares of First National Stock outstanding at the
time of the BANK IV Kansas Merger is effected will cease to exist, and
each share of First National Stock not owned by FNB will automatically
be converted into the right to receive 95.92 shares of Fourth Stock.
Interests of Mr. Harding in the Mergers
In considering the recommendations of First Dodge's, MBI's, and
First National's Boards of Directors, First Dodge, MBI, and First
National stockholders should be aware that John V. Harding, Chairman of
the Board of First Dodge and First National and President and a
director of MBI and a director of Metro Bank, has certain interests in
the Mergers that are in addition to the interests of stockholders
generally and which may create potential conflicts of interest.
The Agreement provides that, prior to the consummation of the
Mergers, First National and Mr. Harding will execute a consulting and
marketing agreement pursuant to which Mr. Harding will perform
specified consulting and marketing services for BANK IV Kansas for a
period of five years in consideration of which he will receive $155,000
per year. The agreement also provides that Mr. Harding will not
compete with BANK IV Oklahoma within Tulsa or Wagoner Counties in
Oklahoma or with BANK IV Kansas within 100 miles of Dodge City, Kansas
during such five year period. Upon consummation of the Mergers, Mr.
Harding will receive the automobile then being furnished to him by
First National. A copy of the consulting and marketing agreement is
attached as Exhibit "E" to the Agreement, Annex I hereto.
Conditions to and Abandonment of the Mergers; Amendment
The respective obligations of Fourth Financial, First Dodge, MBI,
and First National to effect the Mergers are subject to the
satisfaction and continuance in effect as of the Effective Time of a
number of conditions, among which are the following: (i) the
representations and warranties made by each party shall be true in all
material respects at the Effective Time; (ii) the requisite approvals
of the stockholders of First Dodge, FNB, MBI, First National, and Metro
Bank shall have been obtained; (iii) all necessary governmental
approvals shall have been obtained; (iv) absence of litigation or
judicial decree or order preventing the Mergers; (v) receipt of certain
legal opinions and certificates; (vi) receipt of certain agreements
from "affiliates" of First Dodge, MBI, and First National concerning
future sales of the Fourth Stock to be received by them in the Mergers;
(vii) the performance by the parties of their respective covenants
contained in the Agreement; (viii) the stockholder's equity of Metro
Bank and the consolidated stockholders' equity of First National,
calculated in accordance with generally accepted accounting principles,
as of the end of the month immediately preceding the Effective Time
being not less than $3,500,000 and $9,000,000, respectively; (ix)
receipt of satisfactory environmental assessment reports covering all
of the real property of First Dodge and its subsidiaries; (x) the
number of shares of First Dodge Stock, MBI Common Stock, and First
National Stock with respect to which dissenters' appraisal rights are
perfected, shall not, in the aggregate, be convertible in the Mergers
to more than 5% of the total amount of Fourth Stock issuable in the
Mergers; (xi) Mr. Harding having executed and delivered the consulting
and marketing agreement described above; (xii) Fourth Financial having
received a letter from its independent public accountants that the
Fourth Merger will qualify for accounting purposes as a "pooling of
interests; and (xiii) absence of any material adverse change in the
condition (financial or otherwise), business, liabilities, properties,
or assets of First Dodge or any of its subsidiaries or of Fourth
Financial.
It is contemplated that all of the closing conditions will be
satisfied prior to consummation of the Mergers, but the Agreement
specifically permits any party to waive occurrence of any of such
conditions other than those required by law, such as obtaining
stockholder and governmental approvals. No waiver of a condition will
be made that would be materially adverse to First Dodge, MBI, or First
National stockholders.
The Agreement may only be amended by written instrument.
Termination
The Agreement may be terminated and the Mergers abandoned at any
time prior to the Effective Time, before or after approval of the
Agreement by the stockholders of First Dodge, FNB, MBI, First National,
and Metro Bank either by mutual consent of the parties or by either
Fourth Financial or First Dodge in the event of a material breach of a
covenant or representation or warranty by the other which is not
remedied within 30 days of delivery of written notice thereof. Unless
extended by written agreement of the parties, the Agreement will
terminate automatically if the conditions to closing have not occurred
on or before June 30, 1994.
The Agreement and Merger Agreements may also be terminated by
either First Dodge or by Fourth Financial, if, without fault on the
part of the party terminating the Agreement, the Agreement is not
approved by the First Dodge, MBI, or First National stockholders or if
there had been a denial of a required approval or the granting of a
required approval contingent upon compliance with terms reasonably
deemed onerous by Fourth Financial.
Effective Time
The Agreement provides that, unless otherwise agreed, the
Effective Time will be on a date no later than the last day of the
month in which the last required regulatory approval is received and
the latest legally required waiting period expires. The parties have
agreed to exert their best efforts to cause the Effective Time to be on
or before June 30, 1994. It is presently anticipated that the
Effective Time will be on June 30, 1994.
Covenants
The Agreement contains certain covenants to which First Dodge,
FNB, MBI, Metro Bank, and First National and Fourth Financial have
agreed. Among those covenants are agreements that neither First Dodge
or any of its subsidiaries will: amend any of its charter documents;
issue any capital stock; dispose of any of its assets other than in the
usual course of business; enter into any material contract not in the
ordinary course of business; or enter into any transaction or take any
other action which would constitute a breach of any of the
representations, warranties, or covenants contained in the Agreement.
First Dodge and its subsidiaries are also to conduct their business in
the ordinary course as previously conducted, to take all necessary
actions to assist in obtaining governmental approvals and to cause the
Mergers to be consummated in accordance with the Agreement, to
cooperate with Fourth Financial in obtaining current title evidence,
"Phase I" environmental reports, and surveys covering all of their real
property. Fourth Financial also agreed that BANK IV Kansas would
refinance First Dodge's existing credit facility with an unaffiliated
bank in the principal amount of $6,063,000 on no less favorable terms.
Certain Agreements of the First Dodge Stockholders
The First Dodge Stockholders have agreed, among other things, to
vote their shares in favor of the Agreement and the Merger Agreements
at the Special Meetings; not to dispose of or pledge their shares of
First Dodge Stock prior to the Effective Time; not to enter into any
negotiations with anyone concerning a sale of a controlling interest in
First Dodge or any of its subsidiaries; to sign, if requested, an
"affiliate's agreement" as described below; and to severally indemnify
Fourth Financial, BANK IV Kansas, and BANK IV Oklahoma against any loss
in excess of an aggregate of $240,000 (net of any tax effect) sustained
by them by reason of a breach by the First Dodge Stockholders of any
representations, warranties, or covenants contained in the Agreement,
subject to limitations set forth in the Agreement.
Indemnification of Directors and Officers and Insurance
Fourth Financial has agreed either to maintain directors' and
officers' liability insurance for the officers and directors of First
Dodge and its subsidiaries which is substantially similar to that
insurance currently in effect for two years from the Effective Time or
to add such persons to Fourth Financial's insurance policy.
Dividends
The Agreement provides that First Dodge, MBI, and First National
shall each declare and pay cash dividends prior to the Effective Time,
in an aggregate amount equal to the product of (i) the cash dividends
paid on a shares of Fourth Stock to Fourth Financial stockholders of
record between November 15, 1993 and the Effective Time multiplied by
(ii) the number of shares of Fourth Stock to be issued per share of
First Dodge Stock, MBI Common Stock, and First National Stock,
respectively, so that First Dodge, MBI, and First National stockholders
will receive cash dividends prior to the Effective Time equivalent to
that they would have received had the Mergers been effected on November
15, 1993. The following table shows the dividends paid on First Dodge
Stock, MBI Common Stock, and First National Stock on the dates
indicated:
Dividends Paid
Per Share Paid
--------- ----
First Dodge $29.229 December 15, 1993
29.229 March 16, 1994
MBI .078 February 15, 1994
.078 March 23, 1994
First National 24.939 January 12, 1994
24.939 April 16, 1994
It is not anticipated that any additional dividends will be declared or
paid prior to the Effective Time by First Dodge, MBI, or First
National.
Exchange of Certificates; Fractional Shares
As soon as practicable following the consummation of the Mergers,
First Dodge, MBI, and First National stockholders will be notified by
Fourth Financial of the procedure to be followed to exchange their
stock certificates for certificates of Fourth Stock.
Until surrendered for exchange, each currently outstanding First
Dodge, MBI, or First National stock certificate will be deemed to
represent the right to receive the Fourth Stock into which such stock
has been converted in the Mergers. No dividends or other form of
distribution declared by Fourth Financial will be paid to former First
Dodge, MBI, or First National stockholders until the First Dodge, MBI,
or First National stock certificates are surrendered and exchanged for
Fourth Stock certificates. Upon surrender and exchange of such stock
certificates, there will be paid to the record holders of the Fourth
Stock certificates issued in the exchange the amount, without interest
thereon, of dividends and other distributions, if any, which would
otherwise have become payable on or after the Effective Time with
respect to the number of full shares of Fourth Stock represented
thereby.
No fractional shares of Fourth Stock will be issued in the
Mergers. Each person otherwise entitled to a fractional share will be
paid the cash value for such fractional share, without interest, based
on the closing sales price for Fourth Stock in the NASDAQ National
Market System two trading days preceding the Effective Time as reported
in the Southwest Edition of The Wall Street Journal.
Management After the Mergers
The Agreement provides that the current officers and directors of
Fourth Financial will continue to be the officers and directors of
Fourth Financial after the Mergers. Information concerning the
executive officers of Fourth Financial is contained in Item 1 of the
Form 10-K of Fourth Financial for the year ended December 31, 1993
("Fourth 10-K") under the caption "Executive Officers of Registrant"
and information concerning the directors of Fourth Financial is
contained in the proxy proxy statement for Fourth Financial's annual
meeting of stockholders held on April 21, 1994, (the "Fourth Proxy
Statement") under the caption "Election of Directors", both of which
descriptions are hereby incorporated by reference.
Accounting Treatment
Fourth Financial anticipates that the issuance of Fourth Stock to
First Dodge Stockholders will be treated as a "pooling of interests"
for accounting and financial reporting purposes. Consequently, Fourth
Financial anticipates that it will, in accordance with generally
accepted accounting principles, restate its consolidated financial
statements to include the assets, liabilities, stockholders' equity,
and results of operations of First Dodge and its subsidiaries as
reflected in First Dodge's historical consolidated financial
statements, subject to appropriate adjustments, if any, to conform the
accounting principles of the companies. The issuance of Fourth Stock
to acquire the minority interests of MBI and First National not owned
by First Dodge will be accounted for as purchases as of the date of the
acquisition.
Federal Income Tax Consequences
In General
- ----------
The following discussion summarizes some of the federal income
tax considerations which may be relevant to a stockholder of First
Dodge, MBI, or First National (the "Merging Corporations") considering
the terms of the Agreement and transactions contemplated thereby. No
discussion of state or local tax considerations is provided. It is
impractical to set forth in this discussion all aspects of tax law
which may have consequences with respect to a stockholder's
participation in the Mergers. Accordingly, the following discussion is
not intended to be an exhaustive discussion of all tax considerations
concerning the exchange of stock in a Merging Corporation for Fourth
Stock pursuant to the Agreement and the Merger Agreements.
The Internal Revenue Code of 1986, as amended (the "Code"),
judicial decisions, and administrative interpretations, including
revenue rulings, are subject to change at any time and, in some
circumstances, with retroactive effect. Any material change in any of
these authorities after the date of this Joint Proxy Statement-
Prospectus could result in a change in the tax consequences described
below.
None of Fourth Financial, First Dodge, MBI, or First National has
requested an advance ruling from the Internal Revenue Service as to the
tax consequences of the Mergers.
Taxation of Mergers
- -------------------
For federal income tax purposes:
1. The Mergers will constitute tax-free reorganizations;
2. No gain or loss will be recognized by holders of stock in
a Merging Corporation to the extent such stockholders receive solely
Fourth Stock in the Mergers in exchange for shares of stock which they
hold;
3. The payment of cash in lieu of fractional share interests
in Fourth Stock will be treated as if the fractional shares were
distributed as part of the exchange and then redeemed by Fourth
Financial. These cash payments will be treated as having been received
as distributions in full payment in exchange for the stock redeemed,
resulting in the recognition of gain or loss;
4. The holding period of Fourth Stock received in the Mergers
will include the holding period of the stock for which it is exchanged,
assuming the shares of such stock were capital assets in the hands of
the holder thereof at the Effective Time; and
5. The basis of Fourth Stock received in the Mergers,
including fractional share interests deemed to have been received, will
be the same as the basis of the stock exchanged for Fourth Stock in the
Mergers increased by the amount of gain recognized and decreased by the
amount of cash received by such stockholder pursuant to the Mergers in
lieu of receipt of fractional shares of Fourth Stock.
For the Mergers to constitute tax-free reorganizations (and the
foregoing consequences be applicable to the First Dodge, MBI, and First
National stockholders), each Merger must satisfy what is known as the
"continuity of interest" test. The "continuity of interest" test
requires that there be a continuing interest through stock ownership in
Fourth Financial on the part of the historic First Dodge, MBI, and
First National stockholders. In order for a Merging Corporation's
stockholder to meet the continuity of interest test, there must be no
plan or intention by the Merging Corporation's stockholders to sell,
exchange, or otherwise dispose of a number of shares of Fourth Stock
received in the Mergers that would reduce the Merging Corporation's
stockholders' ownership of Fourth Stock to a number of shares having a
value, as of the Effective Time, of less than 50% of the value of the
formerly outstanding stock as of the same date. For purposes of the
continuity of interest test, an amount of Fourth Stock equal to the sum
of (i) the value of stock surrendered by persons exercising dissenters'
rights, (ii) the value of stock surrendered for cash in lieu of
fractional shares of Fourth Stock, (iii) the value of shares of Fourth
Stock held by stockholders prior to the Mergers and otherwise sold,
redeemed, or disposed of immediately prior to the Effective Time, (iv)
the aggregate cash dividends paid by the Merging Corporation as
permitted by the Agreement, and (v) the value of shares of stock sold,
redeemed, pledged, or disposed of between November 15, 1993 and the
Effective Time, may be deemed received by stockholders in the Mergers
and sold, exchanged, or disposed of immediately thereafter.
Taxation of Cash Received in the Mergers
- ----------------------------------------
The receipt of cash by stockholders of a Merging Corporation in
lieu of receipt of a fractional share of Fourth Stock pursuant to the
Mergers will be taxable to such stockholder for federal income tax
purposes, and should result in such stockholder's being accorded
capital gain or loss treatment, provided that the stock exchanged
therefor was held by such stockholder as a capital asset at the
Effective Time. The amount of gain or loss recognized on the exchange
by a stockholder who receives cash in lieu of a fractional share will
be equal to the difference between the cash received and such
stockholder's adjusted basis in the fractional share deemed exchanged.
Miscellaneous
- -------------
Under federal backup withholding rules, unless an exemption
applies under the applicable law and regulations, Fourth Financial or
the exchange agent engaged by it will be required to withhold 31% of
all cash payments unless the First Dodge, MBI, or First National
stockholder or other payee provides his or her taxpayer identification
number (social security number in the case of an individual, employer
identification number in the case of other taxpayers) and certifies
that such number is correct. Each First Dodge, MBI, or First National
stockholder and, if applicable, each other payee should complete and
sign the Substitute W-9 form that will be included as part of the
letter of transmittal mailed to stockholders after the Effective Time
so as to provide the information and certification necessary to avoid
backup withholding, unless an applicable exemption exists and is proved
in a manner satisfactory to Fourth Financial.
The Code, judicial decisions, and administrative interpretations,
including revenue rulings, are subject to change at any time and, in
some circumstances, with retroactive effect. Any material change in
any of these authorities made after the date of this Joint Proxy
Statement-Prospectus could result in a change in the tax consequences
described above. No assurance can be given that the Internal Revenue
Service will not challenge the conclusions set forth above or that the
legal conclusions described above would be upheld in a court of law.
The federal income tax discussion set forth above is included for
general information only and does not purport to constitute a complete
discussion of all federal income tax consequences applicable in all
circumstances to the Mergers. It may not be applicable to foreign
stockholders, mutual funds, insurance companies, tax-exempt
organizations, broker-dealers, persons who are not United States
residents, or to stockholders who have acquired shares as compensation.
First Dodge, MBI, and First National stockholders are urged to
consult their own tax advisors as to the specific tax consequences to
them of the Mergers, including tax return reporting requirements and
the applicability and effect of existing and proposed federal, state,
local, and other tax laws.
Resales of Fourth Stock Issued in the Mergers; Affiliates
Shares of Fourth Stock received by persons who are deemed to be
"affiliates", as such term is defined in the rules of the Commission
promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), of First Dodge, MBI, and First National prior to the
Mergers may be resold by them during the two years after the Effective
Time only in transactions permitted by the resale provisions of Rule
145 promulgated under the Securities Act or as otherwise permitted
under the Securities Act. The Agreement provides that First Dodge will
furnish Fourth Financial a list of the affiliates of First Dodge, MBI,
and First National and such persons are required to execute and deliver
a written agreement to the effect that they will not offer or sell
shares of Fourth Stock received in the Mergers in violation of the
Securities Act or the rules and regulations of the Commission
promulgated thereunder. In addition, such agreement will provide that
such persons will not sell or otherwise dispose of any shares received
in the Mergers until financial results (including combined revenues and
net income) covering at least 30 days of Fourth Financial's
consolidated operations following the Mergers have been published. If,
as is anticipated at the time of the mailing of this Joint Proxy
Statement-Prospectus to stockholders, the Effective Time is June 30,
1994, affiliates would be permitted to dispose of shares received in
the Mergers, subject to the provisions of Rule 145, after Fourth
Financial's release of its financial results for the third quarter of
1994. Fourth Financial's expectation is that such a release would be
made approximately October 20, 1994.
All certificates evidencing Fourth Stock issued in the Mergers to
affiliates of First Dodge, MBI, or First National will bear a legend
restricting transfer of such shares as described above.
Expenses
Each party to the Agreement is to pay its own expenses incurred
in connection therewith and in connection with the consummation of the
Mergers whether or not the Mergers are effected. It is anticipated
that the combined expenses of First Dodge, MBI, and First National will
be approximately $125,000, and that Fourth Financial's expenses will be
approximately $110,000. In addition to the solicitation of proxies by
use of the mail, First Dodge, MBI, and First National may utilize the
services of their officers and directors, who will receive no
additional compensation, to solicit proxies personally and by telephone
from stockholders.
Appraisal Rights of Dissenting Stockholders
First Dodge Stockholders. Because all three of the First Dodge
stockholders have executed the Agreement and have agreed to vote all of
their shares of First Dodge Stock in favor of the Agreement and the
Fourth Merger Agreement, the rights normally afforded stockholders of
Kansas corporations to dissent from a merger and receive the fair value
of their shares will not be available to them.
MBI Common Stockholders. Set forth below is a discussion of
appraisal rights generally available to stockholders of Oklahoma
corporations. A stockholder of MBI who desires to dissent from the
Agreement and the Fourth Merger Agreement pursuant to Section 1091 of
the Oklahoma General Corporation Act and receive cash payment for his
or her shares must comply with both of the following conditions and
requirements:
1. Such stockholder must deliver to MBI before the taking of
the vote on the Agreement and the Fourth Merger Agreement a
written demand for appraisal of such stockholder's shares. Such
demand should be delivered or mailed in time to arrive before the
vote at the MBI Special Meeting to Metro Bancshares, Inc., 619
Second Avenue, Dodge City, Kansas 67801, Attention: Secretary.
Such a written demand must be made in addition to, and separate
from, any proxy or vote against adoption and approval of the
Agreement. Neither a proxy vote against, nor a vote at the
meeting against, nor a failure to vote for, nor abstaining from
voting on the Fourth Merger will constitute the required written
demand. Unless a stockholder files the written demand as
provided above, he or she will not have any rights as a
dissenting stockholder.
2. Such stockholder must not vote by proxy or in person in
favor of adoption and approval of the Agreement and the Fourth
Merger Agreement. A stockholder who executes and returns an
unmarked proxy will have his or her shares of MBI Common Stock
voted in favor of the Agreement and the Fourth Merger Agreement
and as a consequence thereof will be foreclosed from exercising
any rights as a dissenting stockholder. A stockholder who
abstains from voting by marking a proxy "Abstain" or by otherwise
not voting will not thereby be foreclosed from exercising
dissenters' rights. The failure of a stockholder to vote at the
MBI Special Meeting will not constitute a waiver of his or her
rights as a dissenting stockholder.
Within ten days from the Effective Time, Fourth Financial must mail to
any stockholder who has complied with the two conditions described
above (a "Dissenting Stockholder") written notice that the Fourth
Merger has become effective.
Within 120 days after the Effective Time, either Fourth Financial
or any Dissenting Stockholder may file a petition with the district
court demanding a determination of the value of the stock of all
Dissenting Stockholders. Any Dissenting Stockholder may, at any time
within 60 days after the Effective Time, withdraw the demand of the
stockholder and accept the terms of the Fourth Merger Agreement.
Dissenting Stockholders are entitled to receive from Fourth Financial
a statement setting forth the aggregate number of shares not voted in
favor of the Fourth Merger and with respect to which demands for
appraisal have been received and the aggregate number of holders of
such shares. If no appraisal proceeding is commenced within such 120-
day period, the rights of all Dissenting Stockholders to appraisal
shall cease.
If such an action is commenced, Fourth Financial would be
required to file with the court a verified list containing the names
and addresses of all Dissenting Stockholders. If so ordered by the
court, the clerk of the court would then give notice of the time and
place fixed for the hearing on the petition by registered or certified
mail to Fourth Financial and to all Dissenting Stockholders. Such
notice would also be published in a newspaper of general circulation in
Oklahoma City, Oklahoma, or such other publication as the court deems
advisable.
At the hearing, the court would determine the stockholders who
have perfected their dissenters' rights and may require all such
persons to submit their MBI stock certificates to the court for
notation thereon of the pendency of the appraisal proceedings, and may
dismiss the proceedings with respect to any Dissenting Stockholder who
fails to comply with that order. The court would then, taking into
account all relevant factors, determine the fair value of the MBI
Common Stock of all of the Dissenting Stockholders exclusive of any
element of value arising from the accomplishment or expectation of the
merger, and order its payment to the Dissenting Stockholders, together
with interest, if any, to be paid upon such amount. Discovery and
other pretrial proceedings would be conducted to the extent permitted
by the court in its discretion. Interest may be simple or compound as
the court may direct. Court costs would be taxed upon the parties as
the court directs. Upon application of any Dissenting Stockholder, the
court may order all or a portion of the expenses incurred by any
Dissenting Stockholder in connection with the appraisal proceedings,
including, without limitation, reasonable attorney's fees and the fees
and expenses of experts, to be charged pro rata against all of the
shares entitled to an appraisal.
Any stockholder who has duly demanded appraisal in compliance
with Section 1091 of the Oklahoma General Corporation Act will not,
after the Effective Time, be entitled to vote for any purpose the
shares of MBI Common Stock subject to such demand or to receive payment
of dividends or other distributions with respect to the shares held by
such holder, except for dividends or distributions payable to
stockholders of record at a date prior to the Effective Time of the
Fourth Merger.
MBI stockholders who have elected to dissent are bound by their
election unless they withdraw their demand within 60 days after the
Effective Time and may not thereafter withdraw their election and
receive Fourth Stock without the written consent of Fourth Financial.
The foregoing discussion of dissenters' rights is a summary only
and is qualified in its entirety by reference to Annex II to this Joint
Proxy Statement-Prospectus.
First National Stockholders. Under the provisions of 12 U.S.C.
Section 215a, stockholders of First National have the right to dissent
from the BANK IV Kansas Merger and to have their shares of First
National Stock appraised and purchased for cash. In order to be
eligible for such a purchase, a First National stockholder must comply
with both of the following conditions and requirements:
1. Such stockholder must either vote his or her shares against
the approval and adoption of the Agreement and the BANK IV Kansas
Merger Agreement or give notice prior to the First National
Special Meeting to the presiding officer that such stockholder
dissents from the plan of merger. Such notice should be mailed
or delivered in time to be received prior to the commencement of
the First National Meeting to First National Bank and Trust
Company in Dodge City, 619 Second Avenue, P.O. Box 59, Dodge
City, Kansas 67801, Attention: Chairman of the Board. A First
National stockholder who executes and returns an unmarked proxy
will have his or her shares voted in favor of the Agreement and
the BANK IV Kansas Merger and unless he or she has given written
notice that he or she dissents from the plan of merger, he or she
will be foreclosed from any rights as a dissenting stockholder.
2. Such stockholder must then make a written request for
payment of the value of his or her shares. The notice described
in the preceding paragraph will not suffice to meet this
requirement. Such request must be made to BANK IV Kansas before
thirty days after the Effective Time and must be accompanied by
the stock certificates representing the First National Stock as
to which such dissenters' rights are being exercised. Such
written request should be mailed or delivered to BANK IV Kansas,
National Association, P.O. Box 4, 100 North Broadway, Wichita,
Kansas 67201, Attention: Chairman of the Board. All First
National stockholders who have complied with the notice
requirements described in (1) above will be promptly notified of
the Effective Time.
If there are any dissenting First National stockholders, the
value of their shares shall be ascertained, as of the Effective Time,
by a committee of three persons, composed of one person selected by the
holders of the majority of the stock, the owners of which are
exercising their appraisal rights, one selected by the directors of
BANK IV Kansas, and the third selected by the other two appraisers.
The value selected by any two of the three appraisers shall govern, but
if the value so selected is not satisfactory to any dissenting
stockholder, that stockholder may, within five days after being
notified of the appraised value of the stockholder's shares, appeal to
the Comptroller of the Currency (the "Comptroller") who shall cause a
reappraisal to be made, which shall be final and binding as to the
value of the shares of the stockholder making the appeal.
If, within 90 days of the Effective Time, either one or more of
the appraisers is not appointed or the appraisers fail to determine the
value of the shares, any interested party may make written request to
the Comptroller for the Comptroller to cause an appraisal to be made.
Any appraisal so made by the Comptroller is final and binding on all
parties.
The expenses of the Comptroller in making such an appraisal or
reappraisal are to be paid by BANK IV Kansas. The value of the shares
of First National Stock ascertained in the manner described above is to
be paid promptly to dissenting stockholders.
First National stockholders who have elected to dissent are bound
by their election and may not thereafter withdraw their election and
receive Fourth Stock without the written consent of Fourth Financial.
The foregoing explanation of dissenters' rights applicable to the
BANK IV Kansas Merger is a summary only and is qualified in its
entirety by reference to Annex III to this Joint Proxy Statement-
Prospectus.
Information Applicable to Both MBI and First National
Stockholders. A demand for appraisal must be made by or for and in the
name of the stockholder of record, fully and correctly, as such
stockholder's name appears on the stockholder's stock certificates.
Such demand cannot be made by the beneficial owner if the stockholder
does not also hold the shares of record. If the stock is owned of
record in a fiduciary capacity, such as by a trustee, guardian, or
custodian, such demand must be executed by the fiduciary. If the stock
is owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by all joint owners.
An authorized agent, including an agent for two or more joint owners,
may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner and expressly
disclose the fact that, in exercising the demand, he or she is acting
as agent for the record owner.
A record owner, such as a broker, who holds stock as a nominee
for others, may exercise the right of appraisal with respect to the
shares held for all or less than all beneficial owners of shares held
by the record owner. In such case, the written demand must set forth
the number of shares as to which appraisal is sought. If the number of
shares as to which appraisal is sought is not expressly mentioned, the
demand will be presumed to cover all shares of stock outstanding in the
name of such record owner. Persons whose shares are held by brokers or
other nominees and who desire to exercise dissenters' rights of
appraisal should consider either (a) arranging to have their shares
transferred into their own names of record and making the necessary
written demand for appraisal or (b) arranging to have their broker or
other nominee, as the case may be, take all of the steps necessary to
comply with the applicable statute.
Comparative Rights of Stockholders
The rights of the stockholders of First Dodge, MBI, and First
National are different from the rights of stockholders of Fourth
Financial with respect to several significant matters:
1. The Board of Directors of Fourth Financial is classified
into three classes and only one-third of its members are elected
annually, thereby reducing the benefits of cumulative voting. All
members of the First Dodge, MBI, and First National boards of directors
are elected annually. Cumulative voting is in effect in the election
of Fourth Financial directors. First Dodge, MBI, and First National
also have cumulative voting for election of directors. Cumulative
voting means that each stockholder is entitled, in voting for
directors, to as many votes as equals the number of shares of stock
held by him or her on the record date multiplied by the number of
directors to be elected, and such votes may all be cast for a single
candidate or may be distributed among several or all of the candidates
as the stockholder sees fit.
2. In the event of a proposed merger, sale of substantially
all of the assets, or other business combination of First Dodge, MBI,
or First National, the affirmative vote of only a majority (two-thirds
in the case of First National) of the shares of stock entitled to vote
on the matter may approve such transaction. An 80% vote is required by
Fourth Financial stockholders to approve such actions in certain
circumstances.
The foregoing discussion of certain similarities and material
differences between the rights of First Dodge, MBI, and First National
stockholders and Fourth Financial stockholders under their respective
charter documents and state and federal laws is only a summary of
certain provisions and does not purport to be a complete description of
such similarities and differences, and is qualified in its entirety by
reference to the General Corporation Law of Oklahoma, the General
Corporation Code of Kansas, and the federal National Banking Act, the
common law under such statutes, and the full texts of the Articles of
Incorporation of First Dodge, the Amended and Restated Certificate of
Incorporation of MBI, the Amended Articles of Association of First
National, the Restated Articles of Incorporation of Fourth Financial,
the respective Bylaws of First Dodge, MBI, First National, and Fourth
Financial, and all amendments thereto.
PRO FORMA FINANCIAL STATEMENTS
FOURTH FINANCIAL CORPORATION AND
FIRST DODGE CITY BANCSHARES, INC. (Pending Acquisition)
The following unaudited pro forma condensed consolidated statement
of condition as of December 31, 1993 combines (1) the amounts shown in
the historical consolidated statement of condition of Fourth Financial
and (2) the amounts shown in the historical consolidated statement of
condition of First Dodge all as of December 31, 1993. The combination
of First Dodge is based on the pooling-of-interest method of
accounting. The pro forma condensed consolidated statement of
condition is not necessarily indicative of the combined financial
position as it may be in the future or as it might have been had the
acquisition been consummated on December 31, 1993. The following notes
describe the assumptions used in this pro forma condensed consolidated
statement of condition. This pro forma condensed consolidated
statement should be read in conjunction with the other pro forma and
historical financial statements and notes thereto appearing elsewhere
herein.
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CONDITION
December 31, 1993
(Unaudited)
(Dollars in thousands, except per share amounts)
Fourth First Pro Forma
---------------------------
Financial Dodge Adjustments Combined
----------- --------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks. . . . . . . .$ 313,799 $ 6,893 $ (120) A $ 320,572
Interest-bearing deposits in other
financial institutions. . . . . . . . 2,232 793 -- 3,025
Investment securities. . . . . . . . . 2,929,543 33,095 -- 2,962,638
Trading account securities . . . . . . 474 -- -- 474
Federal funds sold and securities pur-
chased under agreements to resell . . 4,575 9,095 (2,300) A 4,913
(6,457) D
Loans and leases . . . . . . . . . . . 3,257,787 94,292 -- 3,352,079
Allowance for credit losses. . . . . . (66,368) (1,249) -- (67,617)
---------- -------- --------- ----------
Net loans and leases . . . . . . . . 3,191,419 93,043 -- 3,284,462
Bank premises and equipment. . . . . . 142,972 2,692 -- 145,664
Income receivable and other assets . . 94,061 3,206 -- 97,267
Intangible assets, net . . . . . . . . 63,798 2,532 956 C 67,286
---------- -------- --------- ----------
Total assets . . . . . . . . $6,742,873 $151,349 $ (7,921) $6,886,301
========== ======== ========= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Deposits. . . . . . . . . . . . . . . $5,307,736 $129,168 $ (120) A $5,436,784
Other borrowings . . . . . . . . . . . 766,929 5,307 (2,300) A 769,936
Accrued interest, taxes,
and other liabilities . . . . . . . . 55,874 940 (162) D 56,652
Long-term debt . . . . . . . . . . . . 13,989 6,295 (6,295) D 13,989
Minority interest. . . . . . . . . . -- 1,135 (1,135) C --
---------- -------- -------- ---------
Total liabilities . . . . . . . . . 6,144,528 142,845 (10,012) 6,277,361
---------- -------- -------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock. . . . . . . . . . . . 100,000 -- -- 100,000
Common stock . . . . . . . . . . . . . 132,876 5 2,948 B 135,829
Capital surplus. . . . . . . . . . . . 105,905 3,145 (2,948) B 106,101
(1) C
Retained earnings. . . . . . . . . . . 239,456 5,354 -- 244,810
Less: Stock option loans . . . . . . . (1,795) -- -- (1,795)
Treasury stock . . . . . . . . . (3,245) -- 2,092 C (1,153)
Unrealized gains on available-
for-sale securities . . . . . . . . . 25,148 -- -- 25,148
---------- -------- -------- ----------
Total stockholders' equity. . 598,345 8,504 2,091 608,940
---------- -------- -------- ----------
Total liabilities and
stockholders' equity. . . . $6,742,873 $151,349 $ (7,921) $6,886,301
========== ======== ======== ==========
Book value per share of
common stock. . . . . . . . . . . . . $18.83 $18.76
====== ======
Risk-based capital ratios:
Tier I (regulatory minimum 4%) . . 12.97% 13.47%
Total (regulatory minimum 8%) . . 14.22 14.72
Leverage capital ratio
(regulatory minimum 3%) . . . . . . . 7.61 7.92
</TABLE>
Pro forma adjustments and notes to the condensed consolidated
statement of condition are as follows:
(A) To eliminate intercompany balances (dollars in thousands).
Cash and due from banks/deposits. . . . . . . . . 120
Federal funds sold/federal funds purchased 2,300
(B) To record the issuance of 590,711 shares of Fourth Financial
stock in exchange for all of the 5,254.5 shares of First
Dodge in a transaction accounted for as a pooling of
interests.
(C) Fourth Financial also will issue 70,309 shares and 1,200
shares of Fourth Financial stock from treasury in exchange
for the minority interests of First Dodge's subsidiaries:
First National (733 shares) and MBI (4,000 shares),
respectively, in transactions to be accounted for as
purchases. The 71,509 Fourth Financial shares to be issued
in the purchase transactions were valued for purposes of
this pro forma condensed consolidated statement of condition
at $29.25 per share, the closing sales price of Fourth
Financial Stock on December 31, 1993. Cost in excess of net
assets acquired is being amortized using the straight-line
method over 20 years.
(D) To record Fourth Financial's repayment of debt and accrued
interest of First Dodge.
Pro forma book value per share of common stock is based on the
26,463,733 outstanding shares of common stock of Fourth Financial at
December 31, 1993 and the 662,220 shares anticipated to be issued in
the pending First Dodge acquisition.
PRO FORMA FINANCIAL STATEMENTS
FOURTH FINANCIAL CORPORATION, AND
FIRST DODGE CITY BANCSHARES, INC. (Pending Acquisition)
The following unaudited pro forma condensed consolidated
statements of income for the years ended December 31, 1993, 1992, and
1991 combine (1) the amounts shown in the historical consolidated
statements of income of Fourth Financial and (2) the amounts shown in
the historical consolidated statements of income of First Dodge. The
combination of First Dodge is based on the pooling-of-interests method
of accounting assuming the acquisition had been consummated at the
beginning of the three-year period presented and other assumptions also
described in the following notes. The pro forma results for the year
ended December 31, 1993 are not necessarily indicative of the results
as they may be in the future. The pro forma condensed consolidated
statements of income should be read in conjunction with the other pro
forma and historical financial statements and notes thereto appearing
elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Year Ended December 31,
-------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans . . . . . . . . . . . . $262,905 $269,391 $314,771
Interest on short-term investments . . . . . . . . 2,165 4,756 14,760
Interest and dividends on
investment securities . . . . . . . . . . . . . . 178,812 164,679 161,821
Interest and dividends on trading
account securities. . . . . . . . . . . . . . . . 136 222 594
-------- -------- --------
Total interest income. . . . . . . . . . . . . . 444,018 439,048 491,946
-------- -------- --------
Interest expense:
Interest on deposits . . . . . . . . . . . . . . . 158,195 183,523 260,320
Interest on other borrowings . . . . . . . . . . . 19,095 10,342 13,188
Interest on long-term debt . . . . . . . . . . . . 2,286 3,764 4,683
-------- -------- --------
Total interest expense . . . . . . . . . . . . . 179,576 197,629 278,191
-------- -------- --------
Net interest income. . . . . . . . . . . . . . . . . 264,442 241,419 213,755
Provision for credit losses. . . . . . . . . . . . . 6,964 21,358 43,926
-------- -------- --------
Net interest income after provision
for credit losses . . . . . . . . . . . . . . . . . 257,478 220,061 169,829
Noninterest income . . . . . . . . . . . . . . . . . 90,735 84,656 87,373
Noninterest expense. . . . . . . . . . . . . . . . . 258,685 222,274 215,207
-------- -------- --------
Income before income taxes, minority interest,
and extraordinary item. . . . . . . . . . . . . . . 89,528 82,443 41,995
Income taxes . . . . . . . . . . . . . . . . . . . 22,667 19,540 10,041
-------- -------- --------
Income before minority interest and
extraordinary item. . . . . . . . . . . . . . . . . 66,861 62,903 31,954
Minority interest. . . . . . . . . . . . . . . . . . -- (206) (188)
-------- -------- --------
Income before extraordinary item . . . . . . . . . . $ 66,861 $ 62,697 $ 31,766
======== ======== ========
Income before extraordinary item applicable to
common and common-equivalent shares . . . . . . . . $ 59,861 $ 56,746 $ 31,766
======== ======== ========
Earnings before extraordinary item
per common share:
Primary. . . . . . . . . . . . . . . . . . . . . . $2.27 $2.19 $1.27
===== ===== =====
Fully diluted. . . . . . . . . . . . . . . . . . . $2.20 $2.13 $1.24
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1993
(Unaudited)
(In thousands, except per share amounts)
Fourth First Pro Forma
----------------------------
Financial Dodge Adjustments Combined
----------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans . . . . . . . . . . . . $254,730 $ 8,175 $ -- $262,905
Interest on short-term investments . . . . . . . . 1,937 279 (51) A 2,165
Interest and dividends on
investment securities . . . . . . . . . . . . . . 176,664 2,148 -- 178,812
Interest and dividends on trading
account securities. . . . . . . . . . . . . . . . 136 -- -- 136
-------- --------- --------- --------
Total interest income. . . . . . . . . . . . . . 433,467 10,602 (51) 444,018
-------- --------- --------- --------
Interest expense:
Interest on deposits . . . . . . . . . . . . . . . 154,725 3,470 -- 158,195
Interest on other borrowings . . . . . . . . . . . 18,909 237 (51) A 19,095
Interest on long-term debt . . . . . . . . . . . . 1,867 419 -- 2,286
-------- --------- --------- --------
Total interest expense . . . . . . . . . . . . . 175,501 4,126 (51) 179,576
-------- --------- --------- --------
Net interest income. . . . . . . . . . . . . . . . . 257,966 6,476 -- 264,442
Provision (benefit) for credit losses. . . . . . . . 7,056 (92) -- 6,964
-------- --------- --------- --------
Net interest income after provision
for credit losses . . . . . . . . . . . . . . . . . 250,910 6,568 -- 257,478
Noninterest income . . . . . . . . . . . . . . . . . 89,103 1,632 -- 90,735
Noninterest expense. . . . . . . . . . . . . . . . . 252,986 5,651 48 B 258,685
-------- --------- --------- --------
Income before income taxes, minority interest,
and extraordinary item. . . . . . . . . . . . . . . 87,027 2,549 (48) 89,528
Income taxes . . . . . . . . . . . . . . . . . . . 21,845 822 -- 22,667
-------- --------- --------- --------
Income before minority interest
and extraordinary item. . . . . . . . . . . . . . . 65,182 1,727 (48) 66,861
Minority interest. . . . . . . . . . . . . . . . . . -- (199) 199 B --
-------- --------- --------- --------
Income before extraordinary item . . . . . . . . . . $ 65,182 $ 1,528 $ 151 $ 66,861
======== ========= ========= ========
Income before extraordinary item applicable to
common and common-equivalent shares . . . . . . . . $ 58,182 $ 59,861
======== ========
Earnings before extraordinary item
per common share:
Primary. . . . . . . . . . . . . . . . . . . . . . $2.26 $2.27
===== =====
Fully diluted. . . . . . . . . . . . . . . . . . . $2.19 $2.20
===== =====
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1992
(Unaudited)
(In thousands, except per share amounts)
Fourth First Pro Forma
----------------------------
Financial Dodge Adjustments Combined
----------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans . . . . . . . . . . . . $260,741 $ 8,650 $ -- $269,391
Interest on short-term investments . . . . . . . . 4,336 452 (32) A 4,756
Interest and dividends on
investment securities . . . . . . . . . . . . . . 161,820 2,859 -- 164,679
Interest and dividends on trading
account securities. . . . . . . . . . . . . . . . 222 -- -- 222
-------- -------- -------- --------
Total interest income. . . . . . . . . . . . . . 427,119 11,961 (32) 439,048
-------- -------- -------- --------
Interest expense:
Interest on deposits . . . . . . . . . . . . . . . 179,013 4,510 -- 183,523
Interest on other borrowings . . . . . . . . . . . 10,060 314 (32) A 10,342
Interest on long-term debt . . . . . . . . . . . . 3,324 440 -- 3,764
-------- -------- -------- --------
Total interest expense . . . . . . . . . . . . . 192,397 5,264 (32) 197,629
-------- -------- -------- --------
Net interest income. . . . . . . . . . . . . . . . . 234,722 6,697 -- 241,419
Provision for credit losses. . . . . . . . . . . . . 21,343 15 -- 21,358
-------- -------- -------- --------
Net interest income after provision
for credit losses . . . . . . . . . . . . . . . . . 213,379 6,682 -- 220,061
Noninterest income . . . . . . . . . . . . . . . . . 83,014 1,642 -- 84,656
Noninterest expense. . . . . . . . . . . . . . . . . 216,926 5,348 -- 222,274
-------- -------- -------- --------
Income before income taxes, minority interest,
and extraordinary item. . . . . . . . . . . . . . . 79,467 2,976 -- 82,443
Income taxes . . . . . . . . . . . . . . . . . . . 18,534 1,006 -- 19,540
-------- -------- -------- --------
Income before minority interest
and extraordinary item. . . . . . . . . . . . . . . 60,933 1,970 -- 62,903
Minority interest. . . . . . . . . . . . . . . . . . -- (206) -- (206)
-------- -------- -------- --------
Income before extraordinary item . . . . . . . . . . $ 60,933 $ 1,764 $ -- $ 62,697
======== ======== ======== ========
Income before extraordinary item applicable to
common and common-equivalent shares . . . . . . . . $ 54,982 $ 56,746
======== ========
Earnings before extraordinary
item per common share:
Primary. . . . . . . . . . . . . . . . . . . . . . $2.17 $2.19
===== =====
Fully diluted. . . . . . . . . . . . . . . . . . . $2.11 $2.13
===== =====
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, 1991
(Unaudited)
(In thousands, except per share amounts)
Fourth First Pro Forma
----------------------------
Financial Dodge Adjustments Combined
----------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans . . . . . . $305,778 $ 8,993 $ -- $314,771
Interest on short-term investments . . 13,724 1,126 (90) A 14,760
Interest and dividends on
investment securities . . . . . . . . 159,472 2,349 -- 161,821
Interest and dividends on trading
account securities. . . . . . . . . . 594 -- -- 594
-------- -------- -------- --------
Total interest income. . . . . . . . 479,568 12,468 (90) 491,946
-------- -------- -------- --------
Interest expense:
Interest on deposits . . . . . . . . . 254,005 6,315 -- 260,320
Interest on other borrowings . . . . . 13,070 208 (90) A 13,188
Interest on long-term debt . . . . . . 4,134 549 -- 4,683
-------- -------- -------- --------
Total interest expense . . . . . . . 271,209 7,072 (90) 278,191
-------- -------- -------- --------
Net interest income. . . . . . . . . . . 208,359 5,396 -- 213,755
Provision for credit losses. . . . . . . 43,665 261 -- 43,926
-------- -------- -------- --------
Net interest income after provision
for credit losses . . . . . . . . . . . 164,694 5,135 -- 169,829
Noninterest income . . . . . . . . . . . 85,896 1,477 -- 87,373
Noninterest expense. . . . . . . . . . . 210,341 4,866 -- 215,207
-------- -------- -------- --------
Income before income taxes, minority
interest, and extraordinary item. . . . 40,249 1,746 -- 41,995
Income taxes . . . . . . . . . . . . . 9,537 504 -- 10,041
-------- -------- -------- --------
Income before minority interest and
extraordinary item. . . . . . . . . . . 30,712 1,242 -- 31,954
Minority interest. . . . . . . . . . . . -- (188) -- (188)
-------- -------- -------- --------
Income before extraordinary item . . . . $ 30,712 $ 1,054 $ -- $ 31,766
======== ======== ======== ========
Income before extraordinary item
applicable to common and
common-equivalent shares. . . . . . . . $ 30,712 $ 31,766
======== ========
Earnings before extraordinary
item per common share:
Primary. . . . . . . . . . . . . . . . $1.26 $1.27
===== =====
Fully diluted. . . . . . . . . . . . . $1.23 $1.24
===== =====
</TABLE>
Pro forma adjustments and notes to the condensed consolidated statements of
income are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1993 1992 1991
--------- --------- ----------
(In thousands)
<S> <C> <C> <C>
(A) To eliminate intercompany income/expense:
Interest on short-term investments/
interest on short-term borrowings . . . . . . . . . . . 51 32 90
(B) To reflect adjustments resulting from the purchase method of
accounting in connection with the acquisition of the minority
interests of First Dodge's subsidiaries: First National
and MBI:
Noninterest expense (amortization of cost in
excess of net assets acquired) . . . . . . . . . . . . . 48 -- --
To eliminate minority interest in earnings. . . . . . . . 199 -- --
</TABLE>
Not included in these condensed consolidated statements of income are
$2,017,000 (net of a $586,000 tax benefit) of nonoperating charges
associated with the acquisition of First Dodge. These nonoperating
charges include severance payments, data processing contract
settlements and conversions, the write down of duplicate or obsolete
facilities, and other similar charges and a charge of $1,100,000 (net
of a $24,000 tax benefit) to accelerate the amortization of intangible
assets currently recorded by First Dodge. Other adjustments to conform
the accounting policies of First Dodge to the accounting policies of
Fourth Financial are immaterial.
Pro forma earnings before extraordinary item per common share are
based on the following weighted average number of shares outstanding:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1993 1992 1991
--------- --------- -----------
<S> <C> <C> <C>
Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,396,058 25,901,186 25,007,717
Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . 30,426,772 29,488,679 25,793,239
</TABLE>
Primary earnings before extraordinary item per common share were
computed by dividing net income applicable to common and common-
equivalent shares by the weighted average common and common-equivalent
shares outstanding during the period. Fully diluted earnings per
common share were computed by adjusting net income for interest expense
(net of income taxes) associated with convertible debt. The adjusted
net income was then divided by the weighted average of common and
common-equivalent shares outstanding plus the number of shares which
would have been outstanding during the year had convertible securities
been converted in accordance with their respective governing
instruments. Note 17 to the Fourth Financial 1993 Consolidated
Financial Statements more fully describes Fourth Financial's common
stock equivalents and convertible securities.
The adjustment of net income for convertible debt interest expense
(net of income taxes) was as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1993 1992 1991
---------- ---------- -----------
(In thousands)
<S> <C> <C> <C>
Interest expense adjustment. . . . . . . . . . . . . . . . . . . $ 4 $ 85 $264
</TABLE>
INFORMATION CONCERNING FOURTH FINANCIAL
General
Fourth Financial is the largest bank holding company
headquartered in Kansas, based on both assets and deposits, and, at
December 31, 1993, had total assets of $6.7 billion, total deposits of
$5.3 billion, and stockholders' equity of $598.3 million. Fourth
Financial offers a broad range of bank and bank-related services
through its subsidiaries, BANK IV Kansas and BANK IV Oklahoma. Bank IV
Kansas, whose predecessor was originally organized in 1887, is the
largest commercial bank in Kansas and, at December 31, 1993, had
approximately 11% of all insured deposits in Kansas. Bank IV Kansas,
the only major statewide bank in Kansas, has 76 offices in 31
communities. BANK IV Oklahoma has 36 offices in eleven Oklahoma
communities.
Additional information concerning recent and pending acquisitions
by Fourth Financial, information concerning Fourth Financial's
business, and information concerning the principal holders of Fourth
Stock, the directors and executive officers of Fourth Financial,
executive compensation, and certain relationships and related
transactions is contained in the Fourth 10-K and in the Fourth Proxy
Statement. All of such information is hereby incorporated into this
Joint Proxy Statement-Prospectus by reference.
Pending Acquisitions
Information about various pending acquisitions is contained in
Item 1 of the Fourth 10-K under the caption "Pending Acquisitions."
The following discussion is intended to supplement the information
contained in the Fourth 10-K.
On March 23, 1994 Fourth Financial entered into an agreement in
principle to acquire Blackwell Security Bancshares, Inc., the owner of
Security Bank and Trust Co., Blackwell, Oklahoma, for a purchase price
of approximately $7.6 million. Consummation of the proposed
transaction is contingent upon the satisfaction of various conditions
among which are negotiation and execution of a definitive agreement,
Fourth Financial being satisfied as to the results of its due diligence
investigation, and the obtaining of regulatory approvals. Security
Bank and Trust Co. had assets of approximately $49.6 million and
deposits of approximately $43.5 million as of December 31, 1993.
On April 19, 1994, Fourth Financial entered into an agreement in
principle to acquire Stillwater Savings Bank in exchange for shares of
Fourth Stock having an estimated aggregate market value of
approximately $10 million. Stillwater Savings Bank had assets of
approximately $97 million and deposits of approximately $89 million at
December 31, 1993. The Stillwater agreement is subject to various
conditions, among which are negotiation and execution of a definitive
agreement, Fourth Financial being satisfied as to the results of its
due diligence investigation, and obtaining requisite governmental and
shareholder approvals.
Fourth Financial continues to be engaged in an active acquisition
program. Pursuant to that program, Fourth Financial is presently
considering or participating in discussions concerning additional
acquisitions. However, except for the pending transactions described
above and in the Fourth 10-K, as of the date of this Joint Proxy
Statement-Prospectus, Fourth Financial had no binding commitments,
agreements, or understandings to acquire any additional financial
institutions, but additional acquisition agreements may be negotiated
or entered into at any time.
INFORMATION CONCERNING FIRST DODGE, FIRST NATIONAL, AND MBI
First Dodge
First Dodge was founded in 1981 for the purpose of acquiring FNB.
Its principal assets are ownership of all of the issued and outstanding
capital stock of FNB and all of MBI's preferred stock and 99.56% of the
issued and outstanding MBI Common Stock. First Dodge has no other
operations and has no employees. Its directors are John V. Harding,
Thomas P. Shirley, and Vida Ebener.
The officers of First Dodge are:
Name Office
---- ------
John V. Harding . . . . . . . . . . . . President
Thomas P. Shirley . . . . . . . . . . . Vice President
Thomas P. Shirley . . . . . . . . . . . Secretary-Treasurer
First National
General
- -------
First National Bank and Trust Company in Dodge City ("First
National") was organized on December 17, 1900. First National opened
for business on January 5, 1901, and operated under a state charter
until June 1, 1904 when it was granted a national charter. First
National was purchased by First National Bancshares of Dodge City, Inc.
("FNB") in February 1977. FNB presently owns 87.78% of the outstanding
stock of First National.
First National is the largest of the three banks located in Dodge
City, Kansas, and of the seven banks in Ford County.
First National's primary offices are located in downtown Dodge
City at 619 Second Avenue. First National also has two branch
locations in Dodge City at 819 South Second Avenue and 2307 Central.
The metropolitan statistical area of Dodge City has a population of
approximately 27,000, according to the 1990 U.S. Census.
First National provides traditional bank services to businesses
and financial institutions in a target geographic market of a 50-mile
radius surrounding Dodge City. First National provides a full range of
banking services including checking and savings accounts, certificates
of deposit, individual retirement accounts, agricultural, commercial,
real estate, and consumer loans, safe deposit boxes, cash management,
retail securities brokerage, and trust services.
As of December 31, 1993, First National had total assets of
$104,790, total deposits of $89,687, and net loans outstanding of
$68,265. First National's loan portfolio consists primarily of
agricultural, commercial, industrial, and real estate loans.
Bank Facilities
- ---------------
First National owns its main banking location, containing
approximately 40,356 square feet of office and lobby space and a drive-
in facility located at Second and Spruce, Dodge City, Kansas. The top
four floors of the main bank are rental offices. Both of First
National's branch facilities are owned, with one building containing
approximately 2,435 square feet, and the other facility containing
approximately 1,821 square feet. First National has two remote ATM's
located on owned premises. Additionally, First National utilizes owned
facilities at Third and Spruce for loan activities (6,147 square feet).
Management
- ----------
The executive officers and directors of First National are as
follows;
Name Position
---- --------
John V. Harding Chairman of the Board and Chief
Executive Officer
Larry R. Heyka President and Chief Operating Officer
Anna M. Schilling Senior Vice President and Cashier,
Operations; and Secretary, Board of
Directors
Vida Ebener Director
George Herrmann Director
Thomas P. Shirley Director
H.M. Skaggs, Jr. Director
J. David Wagner Director
Byron Winans Director
Dean R. Young Director
Brian Shirley Advisory Director
Employees
- ---------
On December 31, 1993, First National had 53 full-time equivalent
employees. First National is not a party to any collective bargaining
agreement and its employee relations are considered to be good by First
National's management.
Competition
- -----------
First National has chosen not to attempt to be the low-cost
provider in the market, but rather to emphasize those products and
services with acceptable margins and expanding market opportunities.
A significant portion of First National's earning capacity is derived
from its interest margin, i.e., the net difference between interest
income and interest expense. Pricing is also a principal competitive
factor in the market for deposits, loans, trust services, securities
brokerage, and other fee-generating activities.
Recent Operating History
- ------------------------
First National has had average earnings of $1.5 million for each
of the last five years. Total assets for the past five years have
averaged $106.5 million. Average deposits the past five years have
been $92.6 million with non-interest bearing deposits maintaining a
16.16% level for the same period. Loans have averaged $59 million, or
63.26% of deposits, for the five year period. In 1993, loans averaged
66.53% of deposits.
First National's provision for loan losses is deemed by it to be
adequate at year end 1993 at $889,000 or 1.31% of loans. Other real
estate owned is at a minimum as of December 31, 1993, at $85,000.
Dividends paid to shareholders over the past five years amounted to
$6.7 million.
Financial Information
- ---------------------
Financial information, including audited financial information
and management's discussion and analysis of financial condition and
results of operations of First National and subsidiaries, is included
in the financial statements appearing elsewhere in this Joint Proxy
Statement-Prospectus.
MBI
General
- -------
Metro Bancshares, Inc. ("MBI") was organized in 1983 as an
Oklahoma corporation, with its principal office located at 619 Second
Avenue, Dodge City, Kansas. MBI owns 100% of the capital stock of
Metro Bank. MBI has no employees or operations other than its
ownership of Metro Bank. The directors of MBI are:
John V. Harding
Thomas P. Shirley
Vida Ebener
The officers of MBI are:
Name Office
---- ------
John V. Harding President
Thomas P. Shirley Vice President
Thomas P. Shirley Secretary/Treasurer
Metro Bank's primary offices are located in Broken Arrow,
Oklahoma at 1800 South Elm Place. The metropolitan statistical area of
Broken Arrow has a population of approximately 70,000, according to the
1990 U.S. Census.
Metro Bank provides traditional bank services to businesses and
financial institutions in a target geographic market which includes
Broken Arrow and Coweta. Metro Bank provides a full range of banking
services including checking and savings accounts, certificates of
deposit, individual retirement accounts, agricultural, commercial, real
estate and consumer loans, safe deposit boxes, and cash management.
As of December 31, 1993, Metro Bank had total assets of $45.3
million, total deposits of $40.2 million, and net loans outstanding of
$26 million. Metro Bank's loan portfolio consists primarily of
commercial, industrial, and real estate loans.
Bank Facilities
- ---------------
Metro Bank owns its main banking location, containing
approximately 11,307 square feet of office, lobby and a drive-in space
located at 1800 South Elm Place in Broken Arrow, Oklahoma.
Management
- ----------
The executive officers and directors of Metro Bank are as
follows:
Name Position
---- --------
Paul Anderson President
John V. Harding Director
Richard Mudge Director
Thomas P. Shirley Director
Bruce Switzer Director
Employees
- ---------
On December 31, 1993, Metro Bank had 23 full-time equivalent
employees. Metro Bank is not a party to any collective bargaining
agreement and its employee relations are considered to be good by
management.
Competition
- -----------
Competition for bank loans and services in Broken Arrow and the
surrounding area served by Metro Bank is First National Bank of Broken
Arrow, Arkansas Valley State Bank of Broken Arrow, a branch of State
Bank of Tulsa, a branch of Liberty Bank of Tulsa, and two branches of
Bank of Oklahoma.
Metro Bank has chosen not to attempt to be the low-cost provider
in the market, but rather to emphasize those products and services with
acceptable margins and expanding market opportunities. A significant
portion of Metro Bank's earning capacity is derived from its interest
margin, i.e., the net difference between interest income and interest
expense. Pricing is also a principal competitive factor in the market
for deposits, loans, and other fee-generating activities.
Recent Operating History
- ------------------------
Metro Bank has had aggregate earnings for the past three years of
$1.3 million. Total assets for the same period have averaged $37.6 million.
Average deposits for the past three years amounts to $32.8 million with
noninterest bearing deposits maintaining a 13.98% level and, for the
same period, loans have averaged $23.4 million, or 62.23% of deposits.
Metro Bank's provision for loan losses is deemed to be adequate
at year end 1993 at $360,000 or 1.38% of loans. Other real estate
owned is at a minimum as of December 31, 1993 or $35,000.
Dividends paid to MBI preferred stock shareholders the past two
years amounted to $860,000.
Financial Information
- ---------------------
Financial information, including audited financial information
and management's discussion and analysis of financial condition and
results of operations of MBI and its wholly owned subsidiary, is
included in the financial statements appearing elsewhere in this Joint
Proxy Statement-Prospectus.
DESCRIPTION OF CAPITAL STOCK OF FIRST DODGE, FIRST NATIONAL, AND MBI
First Dodge
- -----------
First Dodge is authorized to issue 100,000 shares of common
stock, par value $1.00 per share. Each holder of First Dodge Stock is
entitled to one vote for each share held, except in the case of
election of directors where holders are allowed to accumulate their
votes. The holders of First Dodge Stock have no preemptive rights to
purchase or subscribe for any additional stock First Dodge may
hereafter issue. All shares of First Dodge Stock are fully paid and
non-assessable. Holders of First Dodge Stock are entitled to receive
dividends as and when declared by the board of directors.
First National
- --------------
First National has the authority to issue 6,000 shares of common
stock, $100.00 par value per share. Each holder of First National
Stock is entitled to one vote for each share held, except in the case
of election of directors where holders are allowed to accumulate their
votes. The holders of First National Stock have no preemptive rights
to purchase or subscribe for any stock First National may hereafter
issue. All shares of First National Stock are fully paid and
nonassessable. Holders of First National Stock are entitled to receive
dividends as and when declared by the board of directors. See "Market
Prices of and Dividends on First Dodge Stock, First National Stock, MBI
Common Stock, and Fourth Stock" for a description of restrictions on
the ability of First National to pay dividends.
MBI
- ---
MBI has the authority to issue 3,000,000 shares of preferred
stock, $1.00 par value per share, of which 1,915,333 shares have been
issued. All of MBI's preferred stock is owned by First Dodge.
MBI has the authority to issue 1,000,000 shares of common stock,
$.10 par value per share, of which 905,000 shares have been issued,
904,795 are issued and outstanding, and 205 are held as treasury
shares. All voting rights are vested exclusively in MBI Common Stock.
Each holder of MBI Common Stock is entitled to one vote for each share
held, except in the case of election of directors where holders are
allowed to accumulate their votes. The holders of MBI Common Stock
have no preemptive rights to purchase or subscribe for any stock MBI
may hereafter issue. All shares of MBI Common Stock are fully paid and
nonassessable.
MBI owns all of the issued and outstanding capital stock of MBI's
subsidiary, Metro Bank of Broken Arrow.
OWNERSHIP OF FIRST DODGE, FIRST NATIONAL, AND MBI STOCK
First Dodge
- -----------
The following three stockholders own all of the issued and
outstanding capital stock of First Dodge:
Number of Shares
Name and Address Beneficially Owned Percent of Class
---------------- ------------------ ----------------
Thomas P. Shirley (1) 2,102.75 40%
2000 Country Club Drive
Dodge City, KS 67801
Vida Ebener Revocable 2,102.75 40
Trust
C/O First National Bank
P.O. Box 59
Dodge City, KS 67801
John V. Harding (1) 1,049.00 20
1819 LaMesa Dr.
Dodge City, KS 67801
__________
(1) Is also an officer and director of First Dodge.
First National
- --------------
Set forth below is the name and address of the only entity or
person who beneficially owned, as of March 31, 1994, 5% or more of the
issued and outstanding shares of First National Stock.
Number of Shares Percent
Name and Address Beneficially Owned of Class
- ---------------- ----------------- --------
First Dodge City Bancshares, Inc.
(through its wholly owned
subsidiary, First National
Bancshares of Dodge City, Inc.)
P.O. Box 59
Dodge City, Kansas 67801 5,267 87.78%
_____________
Set forth in the following table is certain information as of March 31,
1994, as to the number of shares of First National Stock beneficially owned (i)
by each director of First National (ii) each executive officer of First
National, and (iii) by the executive officers and directors of First
National as a group.
Number of Shares Percent
Name and Address Beneficially Owned of Class
- ---------------- ----------------- --------
Vida Ebener 10 (1) .17%
John V. Harding 10 (1) .17
George Herrmann 10 .17
Larry R. Heyka 10 .17
Anna M. or Larry J.
Schilling 25 .42
Thomas P. Shirley 10 (1) .17
H.M. Skaggs, Jr. 10 .17
J. David Wagner 10 .17
Byron Winans 10 .17
Dean R. Young 10 .17
All executive officers and
directors as a group (10 persons) 115 1.92
_____________
(1) Does not include the 5,267 shares beneficially owned by First Dodge of
which Mr. Harding and Mr. Shirley are officers, and Mr. Harding, Mr.
Shirley, and Mrs. Ebener are directors, and substantial stockholders.
MBI
- ---
As of the date of this Joint Proxy Statement-Prospectus, the only
beneficial owner of 5% or more of any class of equity security issued
by MBI is First Dodge City Bancshares, Inc., P.O. Box 59, Dodge City,
Kansas 67801, which owns 1,915,333 shares, or 100% of the issued and
outstanding shares of MBI's preferred stock, and 900,795 shares, or
99.56% of the issued and outstanding MBI Common Stock. As of such date
no officer or director of MBI beneficially owned any shares of any
class of MBI's capital stock.
Shares of Fourth Stock to be Received in Mergers
- ------------------------------------------------
Set forth below, as to each director and executive officer of
First Dodge, First National, and MBI and each known beneficial owner of
5% or more of First Dodge Stock, First National Stock, and MBI Common
Stock, and all executive officers and directors of First Dodge, First
National, and MBI as a group, is information as of March 31, 1994, as
to the number of share of Fourth Stock anticipated to be received by
such persons or groups in the Mergers and their estimated percentage
ownership of Fourth Stock immediately upon consummation of the Mergers,
both if all the other pending acquisitions by Fourth Financial
described elsewhere herein are effected and if none is effected.
Percentage
Number of shares Ownership if GSB
of Fourth Stock pending acquisition
to be Is not Is
Name beneficially owned effected effected (1)
- ---- ------------------ -------- ------------
Vida Ebener 237,350 0.88% 0.80%
John V. Harding 118,887 0.44 0.40
George Herrmann 959 (2) (2)
Larry R. Heyka 959 (2) (2)
Anna M. or Larry J.
Schilling 2,398 0.01 0.01
Thomas P. Shirley 237,350 0.88 0.80
H.M. Skaggs, Jr. 959 (2) (2)
Jon David Wagner 959 (2) (2)
Byron Winans 959 (2) (2)
Dean R. Young 959 (2) (2)
All directors and executive
officers of First Dodge,
as a group (3 persons) 593,587 2.19 1.99
All directors and executive
officers of First National,
as a group (10 persons) 115 (2) (2)
All directors and executive
officers of MBI, as a
group (0 persons) 0 (2) (2)
All directors and executive
officers of all three
Merging Corporations
as a group (13 persons) 593,702 2.19 1.99
________________
(1) Assumes the issuance of 2,798,813 shares of Fourth Stock in
other pending transactions.
(2) Less than one-hundredth of one percent.
MARKET PRICES OF AND DIVIDENDS ON FIRST DODGE STOCK,
FIRST NATIONAL STOCK, MBI COMMON STOCK, AND FOURTH STOCK
First Dodge Stock
- -----------------
Dividends
---------
The following table outlines the per share dividend payments for
the past five years:
Year Dividends per share
---- -----------------------
1993 $132.00
1992 142.73
1991 19.03
1990 14.27
1989 31.16
Market Prices and Recent Transactions
-------------------------------------
There have been no transactions in First Dodge Stock since the
corporation was originally organized in 1981.
First National Stock
- --------------------
Dividends
---------
The following table outlines the per share dividend payments on
First National Stock for the past five years:
Year Dividends paid
---- --------------
1993 $225.83
1992 216.66
1991 234.16
1990 210.83
1989 204.16
The ability of a national bank such as First National, to pay
dividends is limited by federal law. A national bank may only pay
dividends in any year of an amount equal to the bank's net profits for
that year plus the profits for the two preceding years retained by the
bank, without obtaining regulatory approval.
Market Prices and Recent Transactions
-------------------------------------
There is no established trading market for First National Stock.
The most recent transaction involving First National Stock for
which First National has stock price information, occurred on January
9, 1991, in which 10 shares of stock were sold as director's qualifying
stock. The share of common stock in that transaction were valued at
$1,437.58 per share, which was the per share tangible book value of
First National as of January 8, 1991.
As of March 31, 1994, there were 25 record holders of First
National Stock.
MBI Common Stock
----------------
Dividends
---------
There have been no dividend payments on MBI Common Stock during
the last five years.
Market Prices and Recent Transactions
-------------------------------------
There is no established trading market for MBI's Common Stock.
The most recent transactions involving MBI Common Stock for which
MBI has stock price information occurred on May 10, 1988, when First
Dodge purchased 400 shares for a total cost of $4,400 or $16.00 per
share, and on October 1, 1991, when First Dodge acquired 30,039 shares
of MBI Common Stock by assuming $99,624.20 of indebtedness owed by an
MBI stockholder to FNB.
As of March 31, 1994, there were two record holders of MBI Common
Stock, and one record holder of MBI preferred stock.
Fourth Stock
------------
Fourth Stock is traded in the over-the-counter market and is
reported under the National Association of Securities Dealers Automated
Quotation ("NASDAQ") National Market System symbol FRTH.
The following table sets forth the high and low closing sales
prices of Fourth Stock as reported on the NASDAQ National Market System
and the cash dividends paid per share of common stock for the periods
indicated.
Period High Low Dividends
------ ---- --- ---------
1991:
First Quarter 21 1/4 16 1/2 .22
Second Quarter 20 1/2 18 .22
Third Quarter 21 1/4 18 1/4 .22
Fourth Quarter 24 1/2 19 1/4 .22
1992:
First Quarter 26 1/4 22 1/2 .22
Second Quarter 28 1/2 24 1/2 .22
Third Quarter 27 1/4 24 .22
Fourth Quarter 31 1/2 25 .22
1993:
First Quarter 26 1/4 22 1/2 .22
Second Quarter 30 7/8 26 7/8 .24
Third Quarter 31 1/4 28 1/2 .24
Fourth Quarter 30 3/8 26 .26
1994:
First Quarter 29 25 3/8 .26
Second Quarter
(through May __) .26(1)
________________
(1) Payable June 1 to stockholders of record May 1.
A public announcement of the Agreement was made on November 18,
1993. The reported closing sales price of Fourth Stock on November 17,
1993, was $27.00.
Information concerning a recent reported price of Fourth Stock is
set forth on the cover page of this Joint Proxy Statement-Prospectus.
Holders of Fourth Stock are entitled to receive dividends thereon
when, as, and if declared by the Board of Directors out of funds
legally available for such purpose, and, upon liquidation, to share
ratably in any assets available for distribution after payment of
liabilities. Information about restrictions on the ability of Fourth
Financial to pay dividends is contained in Item 1 of the Fourth 10-K,
under the caption "Regulation and Supervision".
Holders of First Dodge Stock, MBI Common Stock, and First
National Stock are entitled to receive dividends thereon when, as, and
if declared by the Boards of Directors out of funds legally available
for such purpose, and, upon liquidation, to share ratably in any assets
available for distribution after payment of liabilities. First Dodge
and MBI are both dependent on receiving dividends from their subsidiary
banks in order to be able to pay dividends. Information about
restrictions on the ability of First National and Metro Bank to pay
dividends to their parents is contained in the Notes to Financial
Statements appearing elsewhere in this Joint Proxy Statement-Prospectus
under the caption "Regulatory Matters."
Neither Fourth Financial nor any of its executive officers or
directors or their associates owned any shares of capital stock of
First Dodge, MBI, or First National on the date of this Joint Proxy
Statement-Prospectus and none of First Dodge, MBI, or First National
nor any of their executive officers or directors beneficially owned any
shares of Fourth Stock on such date except Larry R. Heyka, President of
First National, owns 100 shares of Fourth Stock and Dean Young, a
director of First National, owns 545 shares of Fourth Stock.
EXPERTS
The consolidated financial statements of Fourth Financial
Corporation appearing in Fourth Financial Corporation's Annual Report
(Form 10-K) for the year ended December 31, 1993, have been audited by
Ernst & Young, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference, as to
the year 1992 are based in part on the reports of Arthur Andersen &
Co., Sartain Fischbein & Co., and GRA, Thompson, White & Co., P.A.,
independent auditors, as to the year 1991 are based in part on the
reports of Arthur Andersen & Co., Sartain Fischbein & Co., Grant
Thornton, and Deloitte & Touche, independent auditors. The financial
statements referred to above are included in reliance upon such reports
given upon the authority of such firms as experts in accounting and
auditing.
The consolidated financial statements of First Dodge at December
31, 1993, and for the period ended December 31, 1993, included in this
Joint Proxy Statement-Prospectus have been audited by Smoll, Banning
and Neier, Chartered, independent public accountants, whose report
appears elsewhere herein and in the Registration Statement, and have
been so included in reliance upon such report given upon the authority
of the firm as experts in auditing and accounting. Smoll, Banning and
Neier, Chartered, compiled the consolidated financial statements of
First Dodge at December 31, 1992 and for each of the two years in the
period ended December 31, 1992, that have been included in this Joint
Proxy Statement-Prospectus.
The consolidated financial statements of First National at
December 31, 1993 and 1992, and for each of the three years in the
period ended December 31, 1993, included in this Joint Proxy Statement-
Prospectus have been audited by Smoll, Banning and Neier, Chartered,
independent public accountants, whose report appears elsewhere herein
and in the Registration Statement, and have been so included in
reliance upon such report given upon the authority of the firm as
experts in auditing and accounting.
The consolidated financial statements of MBI at December 31,
1993, and for the period ended December 31, 1993, included in this
Joint Proxy Statement-Prospectus have been audited by Smoll, Banning
and Neier, Chartered, independent public accountants, whose report
appears elsewhere herein and in the Registration Statement, and have
been so included in reliance upon such report given upon the authority
of the firm as experts in auditing and accounting. Smoll, Banning and
Neier, Chartered, compiled the consolidated financial statements of MBI
at December 31, 1992 and for each of the two years in the period ended
December 31, 1992, that have been included in this Joint Proxy
Statement-Prospectus.
The consolidated financial statements of Great Southern Bancorp,
Inc. for the year ended June 30, 1993 included in this Joint Proxy
Statement-Prospectus have been audited by Baird, Kurtz & Dobson,
independent auditors, whose report appears elsewhere herein and in the
Registration Statement, and have been so included in reliance upon such
report given upon the authority of the firm as experts in auditing and
accounting.
LEGAL MATTERS
The legality of the Fourth Stock to be issued in the Mergers is
being passed upon for Fourth Financial by Foulston & Siefkin, Wichita,
Kansas. As of May 1, 1994, two of the partners in such law firm
participating in the Mergers for Foulston & Siefkin beneficially owned
an aggregate of 13,368 shares of Fourth Stock. Certain legal matters
in connection with the Mergers will be passed upon for First Dodge,
MBI, First National, and the First Dodge Stockholders by Mangan,
Dalton, Trenkle, Rebein & Doll Chartered, Dodge City, Kansas.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed with the Securities and
Exchange Commission by Fourth Financial (File No. 0-4170) are
incorporated herein by reference:
1. The annual report of Fourth Financial on Form 10-K for the
year ended December 31, 1993.
2. The description of the capital stock of Fourth Financial
contained in its quarterly report on Form 10-Q for the
quarter ended June 30, 1992.
3. The revised definitive proxy statement of Fourth Financial
used in connection with its 1994 Annual Meeting of
Stockholders, held on April 21, 1994.
4. All documents filed by Fourth Financial pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Securities and
Exchange Act of 1934, as amended, after the date hereof and
before the date of the Special Meetings shall be deemed to
be incorporated by reference herein and made a part hereof
from the date any such document is filed.
Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes hereof
to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated by reference
herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part of this
Joint Proxy Statement-Prospectus except as so modified or superseded.
The Annual Report of Fourth Financial on Form 10-K for the year
ended December 31, 1993, accompanies this Joint Proxy
Statement-Prospectus.
DEADLINE FOR SUBMISSION OF STOCKHOLDERS'
PROPOSALS FOR
THE 1995 ANNUAL MEETING OF STOCKHOLDERS OF FOURTH FINANCIAL
Any proposals to be submitted by Fourth Financial stockholders
pursuant to Rule 14a-8 of the Securities and Exchange Commission, other
than proposed nominees for election as directors, at Fourth Financial's
1995 Annual Meeting of Stockholders must be received by Fourth
Financial at its principal executive offices at 100 North Broadway,
Post Office Box 4, Wichita, Kansas 67201, by November 21, 1994, for
inclusion in Fourth Financial's proxy statement and form of proxy. If
the date of the 1995 Annual Meeting is changed to a date more than
thirty days earlier or later than April 21, 1995, Fourth Financial
shall, in a timely manner, inform its stockholders of such change and
the date by which proposals of stockholders must be received for such
inclusion.
Fourth Financial's Bylaws provide that nominations for directors,
together with certain information specified by the Bylaws, must be
submitted in writing not later than fourteen days nor earlier than
fifty days prior to the date of the Annual Meeting of Stockholders,
except that if fewer than twenty-one days' written notice of the
meeting is given to stockholders, such nominations may be made during
the seven days following the date the notice was made.
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION
First Dodge City Bancshares, Inc. and Subsidiaries Page
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Condition as of December 31, 1993 (audited)
and 1992 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Income for the years ended
December 31, 1993 (audited), 1992, and 1991 (both unaudited) . . . . . F-
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1993 (audited), 1992, and 1991 (both unaudited) . . F-
Consolidated Statements of Cash Flows for the years ended
December 31, 1993 (audited), 1992, and 1991 (both unaudited) . . . . . F-
Notes to Consolidated Financial Statements for the years ended
December 31, 1993 (audited), 1992, and 1991 (both unaudited) . . . . . F-
Report of Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . F-
Report of Management. . . . . . . . . . . . . . . . . . . . . . . . . . . F-
Selected Consolidated Financial Data. . . . . . . . . . . . . . . . . . . F-
Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . F-
Quarterly Financial Data (Unaudited). . . . . . . . . . . . . . . . . . . F-
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION
Metro Bancshares, Inc. and Subsidiaries Page
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Condition as of December 31, 1993 (audited)
and 1992 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Income for the years ended
December 31, 1993 (audited), 1992, and 1991 (both unaudited) . . . . . F-
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1993 (audited), 1992, and 1991 (both unaudited) . . F-
Consolidated Statements of Cash Flows for the years ended
December 31, 1993 (audited), 1992, and 1991 (both unaudited) . . . . . F-
Notes to Consolidated Financial Statements for the years ended
December 31, 1993 (audited), 1992, and 1991 (both unaudited) . . . . . F-
Report of Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . F-
Report of Management. . . . . . . . . . . . . . . . . . . . . . . . . . . F-
Selected Consolidated Financial Data. . . . . . . . . . . . . . . . . . . F-
Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . F-
Quarterly Financial Data (Unaudited). . . . . . . . . . . . . . . . . . . F-
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION (Cont'd)
First National Bank and Trust Company in Dodge City and Subsidiaries Page
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Condition as of December 31, 1993
and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Income for the years ended
December 31, 1993, 1992, and 1991. . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1993, 1992, and 1991. . . . . . . . . . . . . . . . F-
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992, and 1991. . . . . . . . . . . . . . . . . . . F-
Notes to Consolidated Financial Statements for the years ended
December 31, 1993, 1992, and 1991. . . . . . . . . . . . . . . . . . . F-
Report of Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . F-
Report of Management. . . . . . . . . . . . . . . . . . . . . . . . . . . F-
Selected Consolidated Financial Data. . . . . . . . . . . . . . . . . . . F-
Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . F-
Quarterly Financial Data (Unaudited). . . . . . . . . . . . . . . . . . . F-
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION (Cont'd)
Fourth Financial Corporation, First Dodge City Bancshares, Inc.,
Emprise Bank National Association, and Equity Bank for Savings, F. A.,
and Great Southern Bancorp, Inc. (Pending Acquisitions) Page
Pro forma Condensed Consolidated Statement of Condition
as of December 31, 1993 (unaudited). . . . . . . . . . . . . . . . . . F-
Pro forma Condensed Consolidated Statements of Income for the
years ended December 31, 1993, 1992, and 1991 (unaudited). . . . . . . F-
Pro forma Condensed Consolidated Statement of Income for the
year ended December 31, 1993 (unaudited) . . . . . . . . . . . . . . . F-
Pro forma Condensed Consolidated Statement of Income for the
year ended December 31, 1992 (unaudited) . . . . . . . . . . . . . . . F-
Pro forma Condensed Consolidated Statement of Income for the
year ended December 31, 1991 (unaudited) . . . . . . . . . . . . . . . F-
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION (Cont'd)
Great Southern Bancorp, Inc. and Subsidiaries Page
Independent Accountants' Report . . . . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Financial Condition
as of June 30, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Income for the three years
ended June 30, 1993. . . . . . . . . . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Changes in Stockholders'
Equity for the three years ended June 30, 1993 . . . . . . . . . . . . F-
Consolidated Statements of Cash Flows for the three
years ended June 30, 1993. . . . . . . . . . . . . . . . . . . . . . . F-
Notes to Consolidated Financial Statements for the years
ended June 30, 1993, 1992, and 1991. . . . . . . . . . . . . . . . . . F-
Consolidated Statements of Financial Condition as of
December 31, 1993 and June 30, 1993 (unaudited). . . . . . . . . . . . F-
Consolidated Statements of Income for the three months and the
six months ended December 31, 1993 and 1992 (unaudited). . . . . . . . F-
Consolidated Statemetns of Cash Flows for the six months
ended December 31, 1993 and 1992 (unaudited) . . . . . . . . . . . . . F-
Notes to Consolidated Financial Statements for the six months
ended December 31, 1993 and 1992 (unaudited) . . . . . . . . . . . . . F-
FIRST DODGE CITY BANCSHARES, INC.
AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
First Dodge City Bancshares, Inc.
and Subsidiaries
Dodge City, Kansas 67801
We have audited the accompanying consolidated statement of condition of
First Dodge City Bancshares, Inc. as of December 31, 1993, and the
related consolidated statement of income, changes in stockholders'
equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
First Dodge City Bancshares, Inc. and Subsidiaries as of December 31,
1993, and the results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting
principles.
As discussed in Note 15 to the consolidated financial statements, on
February 25, 1994, the Company entered into an Agreement and Plan of
Reorganization with Fourth Financial Corporation.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for deferred income taxes
effective with the beginning of the year ended December 31, 1993.
We have compiled the accompanying consolidated statement of condition
of First Dodge City Bancshares, Inc. as of December 31, 1992, and the
related consolidated statements of income, changes in stockholders'
equity and cash flows for the years ended December 31, 1992 and 1991,
in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public
Accountants.
The Board of Directors
First Dodge City Bancshares, Inc.
Page 2
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We
have not audited or reviewed the accompanying consolidated financial
statements and, accordingly, do not express an opinion or any other
form of assurance on them.
/s/ Smoll, Banning and Neier, Chtd.
January 21, 1994, except for Note 15,
as to which the date is February 25,
1994, and except for the compiled
financial statements referred to in
this report, as to which the date is
March 30, 1994
<TABLE>
<CAPTION>
FIRST DODGE CITY BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
December 31,
-----------------------
1993 1992
-------- ---------
Audited Unaudited
-------- ---------
(In thousands)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents:
Cash and due from depository institutions $ 6,893 $ 12,913
Federal funds sold 9,095 5,025
-------- ---------
Total cash and cash equivalents 15,988 17,938
-------- ---------
Interest-bearing deposits in depository
institutions 793 1,682
-------- ---------
Investment securities (market value
of $33,491 in 1993 and $43,713 in 1992) 33,095 43,132
-------- ---------
Loans 94,292 81,946
Less-allowance for loan losses 1,249 1,340
-------- ---------
Net loans 93,043 80,606
-------- ---------
Bank premises and equipment 2,692 2,737
-------- ---------
Other real estate owned 120 1,221
-------- ---------
Goodwill 2,532 2,200
-------- ---------
Other assets 3,086 3,743
-------- ---------
Total assets $151,349 $ 153,259
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Demand $ 25,613 $ 25,755
NOW and money market accounts 31,536 34,719
Savings 7,508 7,064
Time, $100,000 and over 13,489 8,206
Other time 51,022 53,177
-------- ---------
Total deposits 129,168 128,921
-------- ---------
Securities sold under agreements to repurchase 5,307 7,769
-------- ---------
Federal funds purchased 207
-------- ---------
Borrowed funds 6,295 6,732
-------- ---------
Other liabilities 940 899
-------- ---------
Minority interest 1,135 1,134
-------- ---------
Stockholders' equity:
Common stock; $1.00 par value; 100,000
shares authorized; 5,254.5 shares
issued and outstanding 5 5
Surplus 3,145 3,145
Retained earnings 5,354 4,447
-------- ---------
Total stockholders' equity 8,504 7,597
-------- ---------
Commitments and contingencies
Total liabilities and stockholders' equity $151,349 $ 153,259
======== =========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
FIRST DODGE CITY BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1993 1992 1991
-------- -------- -------
Audited Unaudited
-------- -----------------
(Dollars in thousands,
except per share amounts)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 8,175 $ 8,650 $ 8,993
Interest on Federal funds sold 219 243 516
Interest from depository institutions 60 209 610
Interest on investment securities:
U.S. Treasury and government agencies 1,675 2,650 1,941
States and political subdivisions 473 209 408
-------- -------- --------
Total interest income 10,602 11,961 12,468
-------- -------- --------
Less interest expense on:
Deposits 3,470 4,510 6,315
Securities sold under agreements
to repurchase 237 314 208
Borrowed funds 419 440 549
-------- -------- --------
Total interest expense 4,126 5,264 7,072
-------- -------- --------
Net interest income 6,476 6,697 5,396
Provision (benefit) for loan losses ( 92) 15 261
-------- -------- --------
Net interest income after provision
(benefit) for loan losses 6,568 6,682 5,135
Non-interest income:
Service charges on deposit accounts 844 807 826
Trust department 267 201 219
Net investment securities gains 174 384
Other 347 250 432
-------- -------- --------
Net interest and non-interest income 8,200 8,324 6,612
-------- -------- --------
Non-interest expenses:
Salaries and employee benefits 2,716 2,518 2,297
Net occupancy expense 548 550 567
Other operating expenses 2,387 2,280 2,002
-------- -------- --------
Total non-interest expenses 5,651 5,348 4,866
-------- -------- --------
Income before income taxes 2,549 2,976 1,746
Income taxes 822 1,006 504
-------- -------- --------
Income before minority interest,
extraordinary item, and cumulative
effect of change in accounting principle 1,727 1,970 1,242
Minority interest in income of
subsidiaries 199 206 188
-------- -------- --------
Income before extraordinary item and
cumulative effect of change in
accounting principle 1,528 1,764 1,054
Extraordinary item - tax benefit from
net operating loss carryforward 130
Cumulative effect of change in
accounting for income taxes 73
-------- -------- --------
Net income $ 1,601 $ 1,894 $ 1,054
======== ======== ========
</TABLE>
FIRST DODGE CITY BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME-CONTINUED
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1993 1992 1991
-------- -------- -------
Audited Unaudited
-------- -----------------
(Dollars in thousands,
except per share amounts)
<S> <C> <C> <C>
Earnings per common share:
Income before extraordinary
item and cumulative effect $ 290.80 $ 335.71 $ 200.59
Extraordinary item 24.74
Cumulative effect of change in
accounting principle 13.89
-------- -------- --------
Net income per share $ 304.69 $ 360.45 $ 200.59
======== ======== ========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
FIRST DODGE CITY BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Retained
stock Surplus earnings Total
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Balance (Unaudited),
December 31, 1990 $ 5 $ 3,145 $ 2,528 $ 5,678
Net income 1,054 1,054
Dividends paid-common ( 100) ( 100)
Dividends paid-preferred* ( 109) ( 109)
-------- -------- -------- --------
Balance (Unaudited),
December 31, 1991 5 3,145 3,373 6,523
Net income 1,894 1,894
Dividends paid-common ( 750) ( 750)
Dividends paid-preferred* ( 70) ( 70)
-------- -------- -------- --------
Balance (Unaudited),
December 31, 1992 5 3,145 4,447 7,597
Net income 1,601 1,601
Dividends paid (694) (694)
-------- -------- -------- --------
Balance (Audited),
December 31, 1993 $ 5 $ 3,145 $ 5,354 $ 8,504
======== ======== ======== ========
<FN>
*Limited life preferred stock dividends on First National Bancshares, Inc.
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
FIRST DODGE CITY BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
----------------------------
1993 1992 1991
-------- -------- --------
Audited Unaudited
-------- ------------------
(In thousands)
<S> <C> <C> <C>
Increase (decrease) in cash and
cash equivalents:
Cash flows from operating activities:
Net income $ 1,601 $ 1,894 $ 1,054
Adjustments to reconcile net income to
net cash provided by operating activities:
Cumulative effect of change in
accounting for income taxes ( 73)
Minority interest in income of
subsidiaries 199 206 124
Depreciation 307 238 222
Loss (gain) on sale of assets 6 6 ( 1)
Provision (benefit) for loan losses ( 92) 15 261
Accretion of loan discounts ( 272) ( 440) ( 180)
Amortization of goodwill 85 85 84
Loss on sale and write-down of
other real estate owned 341 198 64
Write-down of other assets owned 16
Deferred income taxes 86 113 7
Net investment securities gains ( 174) ( 384)
Discount accretion on investment
securities ( 53) ( 20) ( 21)
Premium amortization on
investment securities 262 199 95
Amortization of core deposit intangible 157 149 107
Decrease (increase) in interest
receivable 56 269 ( 86)
Decrease in interest payable ( 44) ( 293) ( 102)
(Decrease) increase in accrued
income taxes 118 ( 479) 104
Other, net ( 43) 116 ( 67)
-------- -------- --------
Net cash provided by operating activities 2,483 1,872 1,665
-------- -------- --------
Cash flows from investing activities:
Net decrease in interest-bearing
deposits in depository institutions 889 4,851 2,179
Purchases of investment securities (14,783) (27,798) (21,509)
Proceeds from sales and maturities
of investment securities 24,786 18,664 10,840
Net decrease (increase) in loans (12,058) 3,982 (10,335)
Additions to bank premises and equipment ( 255) ( 1,278) ( 231)
Additions to other assets ( 27) ( 49) 1
Additions to other real estate owned ( 77) ( 250)
Excess of cash over net liabilities
assumed of acquired savings and loan
institution ( 750)
Proceeds from sale of bank premises
and equipment 8 29 3
Proceeds from sale of other assets
and other real estate owned 747 423 950
Investment in subsidiaries ( 1,035) ( 19)
-------- -------- --------
Net cash used in investing activities ( 693) ( 2,288) (19,121)
-------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
FIRST DODGE CITY BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED
Year ended December 31,
----------------------------
1993 1992 1991
-------- -------- --------
Audited Unaudited
-------- ------------------
(In thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase (decrease) in demand
and savings deposits ( 2,880) 2,686 6,691
Net increase (decrease) in time
deposits 3,127 ( 5,572) 3,529
Net increase (decrease) in securities
sold under agreements to repurchase ( 2,463) ( 6,756) 14,525
Net increase (decrease) in federal
funds purchased ( 207) 207
Proceeds from borrowed funds 1,027 1,452
Repayments of borrowed funds ( 437) ( 538) ( 298)
Dividends paid to minority stockholders ( 187) ( 197) ( 134)
Dividends paid-common stockholders ( 693) ( 750) ( 100)
Dividends paid-preferred stockholders ( 70) ( 109)
-------- -------- --------
Net cash provided by (used in)
financing activities ( 3,740) ( 9,963) 25,556
-------- -------- --------
Increase (decrease) in cash
and cash equivalents ( 1,950) (10,379) 8,100
Cash and cash equivalents, beginning
of year 17,938 28,317 20,217
-------- -------- --------
Cash and cash equivalents, end of year $ 15,988 $ 17,938 $ 28,317
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 4,083 $ 4,971 $ 6,970
======== ======== ========
Income taxes $ 940 $ 464 $ 608
======== ======== ========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
1. Summary of significant accounting policies
------------------------------------------
General
-------
The accounting and reporting policies of the consolidated group
conform to generally accepted accounting principles and to general
practice within the banking industry. In accordance with the usual
practice of banks, assets and liabilities of individual trust funds
are not included in these consolidated financial statements.
Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of First
Dodge City Bancshares, Inc. and its subsidiaries. All significant
intercompany transactions and accounts have been eliminated in
consolidation.
Cash and due from banks
-----------------------
Cash and due from banks includes all non-interest bearing deposits
with other banks. At December 31, 1993, the Federal Reserve
required the Company to maintain an average balance of
approximately $865,000.
Investment securities
---------------------
Investment securities are those securities which the Company has
the ability and intent to hold to maturity. These securities are
stated at cost adjusted for amortization of premiums and accretion
of discounts, which are recognized as adjustments to interest
income. Gains or losses on the sale of investment securities are
recognized on the completed transaction basis.
Effective for the first quarter of 1994, the Company's subsidiary
banks adopted a policy of classifying certain United States
Treasury securities and obligations of United States government
corporations and agencies as "available for sale" in accordance
with the guidelines of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities".
Loans
-----
Loans are carried at principal amounts outstanding less unearned
discount. Unearned discount is being recognized over the life of
the respective loans as a credit to interest income. Loan losses
are charged and recoveries are credited to the allowance for loan
losses. The allowance for loan losses is based on management's
judgement as to potential losses, after consideration of such
factors as recent loan losses and current economic conditions.
Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and
collection efforts, that the borrowers' financial condition is such
that collection of interest is doubtful.
The Company's subsidiary banks grant agribusiness, commercial, real
estate and personal loans to customers in the respective Bank's
market area.
1. Summary of significant accounting policies-continued
----------------------------------------------------
Bank premises and equipment
---------------------------
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets. Gains and losses on
dispositions are credited or charged to income. Maintenance and
repairs are charged to expense as incurred. Bank premises and
equipment are being depreciated over the following estimated useful
lives:
Category Years
-------- -----
Building premises 15-40
Furniture, fixtures and equipment 3-10
Other real estate owned
-----------------------
Other real estate owned consists of properties acquired through
foreclosure or loan settlement. Individual properties are stated
at the lower of fair market value or the carrying amount of the
loan at the time of acquisition. Gains or losses on dispositions
are credited or charged to income.
Goodwill
--------
Goodwill represents the excess of the cost of acquired companies
over the fair market value of their net assets at the date of
acquisition. Amortization expense is computed on the straight-line
method over periods from 20 to 40 years and amounted to $85,338 for
1993, $85,337 for 1992, and $84,351 for 1991.
Income taxes
------------
Income taxes are provided for the tax effects of transactions
reported in the consolidated financial statements and consist of
income taxes currently due plus deferred income taxes. The
deferred income taxes represent the future income tax return
consequences of temporary differences in the recognition of income
and expense for tax and financial statement purposes.
Deferred taxes are computed as prescribed in Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
SFAS No. 109 requires deferred tax balances to be adjusted to
reflect the tax rates in effect when those amounts are expected to
become payable or refundable. SFAS No. 109 is effective for fiscal
years beginning after December 15, 1992 and the Company adopted
SFAS No. 109 in the first quarter of 1993. The cumulative effect
of the change in accounting principle was $72,761 and resulted in
an increase to the deferred tax asset.
Off-balance-sheet financial instruments
---------------------------------------
In the ordinary course of business, the Company has entered into
off-balance-sheet financial instruments consisting of commitments
to extend credit, commitments under credit card arrangements,
commercial letters of credit and standby letters of credit. Such
financial instruments are recorded in the consolidated financial
statements when they become payable.
1. Summary of significant accounting policies-continued
----------------------------------------------------
Statement of cash flows
-----------------------
For purposes of the statement of cash flows, the Company has
defined cash and cash equivalents as those amounts included in the
consolidated balance sheet captions "Cash and due from depository
institutions" and "Federal funds sold".
Fair values of financial instruments
------------------------------------
The following methods and assumptions were used by the Company in
estimating its fair value disclosures in accordance with Statement
of Financial Accounting Standard (SFAS) No. 107, "Disclosures about
Fair Value of Financial Instruments". Because there is no market
for many of these financial instruments, the Company has no basis
to determine whether these estimated fair values would be
indicative of the value that could be obtained in an arms-length
sale.
Cash and due from depository institutions
-----------------------------------------
The carrying amounts reported in the consolidated statements of
condition for cash and due from depository institutions
approximate those assets' fair values.
Interest-bearing deposits in depository institutions
----------------------------------------------------
The carrying amounts of interest bearing deposits in depository
institutions approximate their fair market value. The
maturities of these investments are generally six months or
less.
Investment securities
---------------------
Fair values for investment securities were based on quoted
market prices, where available. If quoted market prices were
not available, fair values were based on quoted market prices of
comparable instruments.
Federal funds sold
------------------
The carrying amounts of Federal funds sold approximate their
fair values.
Loans and leases
----------------
For variable-rate loans that reprice in accordance with indices,
fair values were estimated to be equal to carrying values. A
significant portion of a credit card portfolio's value results
from the ongoing cardholder relationship that generates
receivables and fees over time. This relationship value is not
defined as a financial instrument and therefore not disclosed
under SFAS No. 107. The carrying values of the credit card
receivables approximate their fair values. The fair values for
fixed-rate loans were estimated using discounted cash flow
analyses, using interest rates currently being offered for loans
with similar terms. Because the allowance for credit losses
provides for the credit risk inherent in the loan and lease
portfolio, neither the cash flows nor discount rates were
adjusted to reflect changes in credit risk subsequent to when
loans were originated. Non-performing loans have not been
discounted.
1. Summary of significant accounting policies-continued
----------------------------------------------------
Fair values of financial instruments-continued
----------------------------------------------
Off-balance-sheet instruments
-----------------------------
No premium or discount was ascribed to loan commitments because
when funded virtually all funding will be at current market
rates.
Deposit liabilities
-------------------
For deposits with no defined maturities, demand deposits,
interest-bearing checking deposits, and savings deposits, SFAS
No. 107 defines fair value as the amount payable on demand at
the reporting date (i.e., their carrying amounts). Included in
"Other assets" was $625,494 (net of accumulated amortization)
representing the value of core deposits used in deposit
assumption transactions. The value of the core deposit
relationships built by the Company over time is neither
considered in the fair value amounts nor is it recorded as an
intangible asset in the statements of condition. The carrying
amounts for certificates of deposit approximate the fair market
value with the maturities of the certificates generally twelve
months or less.
Securities sold under agreements to repurchase
----------------------------------------------
The carrying amounts of borrowings under repurchase agreements
approximate their fair values.
Long-term borrowings
--------------------
The carrying amounts of the Company's long-term debt approximate
their fair values with the variable rate debt repriced in
accordance with indices.
2. Investment securities
---------------------
Investment securities with an amortized cost of $12,572,262 were
pledged to secure U.S. Government deposits, other public funds and
trust deposits at December 31, 1993.
The amortized cost and approximate market value of investment
securities follows:
<TABLE>
<CAPTION>
December 31, 1993 (Audited):
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
----------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
U.S. government
corporations
and agencies $ 18,715 $ 197 $( 6) $ 18,906
Obligations of
states and
political
subdivisions 12,088 267 ( 20) 12,335
Mortgage-backed
securities 2,218 6 ( 48) 2,176
Other 74 74
----------- ----------- ----------- -----------
Total $ 33,095 $ 470 $( 74) $ 33,491
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992 (Unaudited):
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
----------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
U.S. government
corporations
and agencies $ 29,694 $ 590 $( 8) $ 30,276
Obligations of
states and
political
subdivisions 6,864 36 ( 79) 6,821
Mortgage-backed
securities 6,500 92 ( 50) 6,542
Other 74 74
----------- ----------- ----------- -----------
Total $ 43,132 $ 718 $( 137) $ 43,713
=========== =========== =========== ===========
</TABLE>
2. Investment securities-continued
-------------------------------
The amortized cost and estimated market value of investment
securities at December 31, 1993, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized market
cost value
----------- -----------
(In thousands)
<S> <C> <C>
Due in one year or less $ 8,018 $ 8,105
Due after one year through five years 18,656 18,860
Due after five years through ten years 4,129 4,276
Due after ten years 74 74
----------- -----------
30,877 31,315
Mortgage backed securities 2,218 2,176
----------- -----------
Total $ 33,095 $ 33,491
=========== ===========
</TABLE>
Proceeds from sales and maturities of investment securities were
$24,785,860, $18,664,930, and $10,840,440 in 1993, 1992, and 1991,
respectively. Gross gains of $174,530 and $383,506 were realized
on those sales in 1993 and 1992, respectively. Gross losses of $36
were realized on sales in 1991.
3. Loans and allowance for loan losses
-----------------------------------
A distribution of loans follows:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
------------------------ ------------------------
Amount Percent Amount Percent
----------- ----------- ----------- -----------
Audited Unaudited
------------------------ ------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Loans to farmers $ 31,361 33.3% $ 26,359 32.2%
Commercial and
industrial
loans 20,762 22.0 15,438 18.8
Real estate
loans 31,720 33.6 28,409 34.7
Loans to
individuals 10,161 10.8 11,217 13.7
Loans to states
and political
subdivisions 34 41
All other loans 254 .3 482 .6
----------- ----------- ----------- -----------
Total loans $ 94,292 100.0% $ 81,946 100.0%
=========== =========== =========== ===========
Total loans-estimated fair value at December 31, 1993 $95,516,069
===========
</TABLE>
The unaccreted balance of discounts on purchased loans amounted to
$1,154,036 and $1,433,129 at December 31, 1993 and 1992,
respectively. Accretion included in interest income amounted to
approximately $270,000 for 1993, $440,000 for 1992, and $180,000
for 1991.
Loans on which the accrual of interest has been discounted or
reduced amounted to $207,000 and $397,000 at December 31, 1993 and
1992, respectively. If interest on those loans had been accrued,
such income would have approximated $21,039 for 1993, $32,783 for
1992, and $64,677 for 1991.
3. Loans and allowance for loan losses-continued
---------------------------------------------
At December 31, 1993, fixed rate loans amounted to approximately
$42 million and the variable rate loans amounted to approximately
$51 million.
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
Audited Unaudited
----------- ------------------------
(In thousands)
<S> <C> <C> <C>
Balance at January 1 $ 1,340 $ 1,334 $ 1,344
Net provision (benefit)
charged (credited)
to income ( 92) 15 261
Recoveries 66 354 30
----------- ----------- -----------
1,314 1,703 1,635
Less-loans charged off 65 363 301
----------- ----------- -----------
Balance at December 31 $ 1,249 $ 1,340 1,334
=========== =========== ===========
</TABLE>
4. Bank premises and equipment
---------------------------
A summary of bank premises and equipment follows:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
Audited Unaudited
----------- -----------
(In thousands)
<S> <C> <C>
Land, buildings and components $ 3,747 $ 3,749
Furniture, fixtures and equipment 1,528 1,489
----------- -----------
5,275 5,238
Less-accumulated depreciation 2,583 2,501
----------- -----------
Net bank premises and equipment $ 2,692 $ 2,737
=========== ===========
</TABLE>
Depreciation expense amounted to $306,695 in 1993, $237,470 in
1992, and $213,792 in 1991. Depreciation expense is included in
net occupancy expense in the consolidated statements of income.
5. Core deposit intangibles
------------------------
The amortized balance of a core deposit intangible of $116,238 and
$170,504 at December 31, 1993 and 1992, respectively, is included
in other assets and represents the excess of liabilities assumed
over assets acquired from the Dodge City branch of Valley Savings
in 1990. The intangible is being amortized over a period of six
years based on a study of the deposits acquired. Amortization
expense amounted to $54,266 in 1993 and 1992, and $63,310 in 1991.
The amortized balance of a core deposit intangible of $509,256 and
$611,773 at December 31, 1993 and 1992, respectively, is included
in other assets and represents the excess of liabilities assumed
over assets acquired from Broken Arrow Savings, F.A. in 1991. The
intangible is being amortized over a period of eight years based on
a study of the deposits acquired. Amortization expense amounted to
$102,518 in 1993, $94,951 in 1992, and $43,276 in 1991.
6. Securities sold under agreements to repurchase
----------------------------------------------
The Company has agreements to sell and repurchase certain
marketable securities. Due to the agreements to repurchase, the
sales of these securities are not recorded. Instead, the
liabilities to repurchase securities sold under these agreements
are reported as liabilities and the investments acquired with the
funds received from the securities sold are included in cash and
cash equivalents and/or investment securities.
7. Borrowed funds
--------------
A summary of borrowed funds follows:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
Audited Unaudited
----------- -----------
(In thousands)
<S> <C> <C>
Variable rate (currently 6%)
note payable to Commerce
Bank of Kansas City, N.A.,
due and payable in full on
August 1, 1994.
Collateralized by pledge of
all stock, whether common
or preferred, of First
National Bancshares of
Dodge City, Inc. and Metro
Bancshares, Inc. and
guaranteed by subsidiaries
and stockholders of the
Company. $ 6,063 $ 6,500
Variable rate (currently 6%)
subordinated debenture
No. 3 to registered owner,
Thomas P. Shirley (a
stockholder of the Company),
due on or before
July 31, 1994. 94 94
Variable rate (currently 6%)
subordinated debenture
No. 4 to registered owner,
Vida Ebener (a stockholder
of the Company), due on or
before July 31, 1994. 94 94
8% subordinated debenture
to Louie L. Kirk, Jr., on
4,000 shares of Metro
Bancshares, Inc. stock,
due on April 28, 1997. 44 44
----------- -----------
Total borrowed funds $ 6,295 $ 6,732
=========== ===========
</TABLE>
In general, the debentures are subordinated to the Company's
indebtedness to Commerce Bank of Kansas City, and any renewal,
extension or refinancing of such indebtedness.
7. Borrowed funds-continued
------------------------
Borrowed funds are scheduled to mature in each of the years
subsequent to December 31, 1993, as follows:
Year Audited
____ -----------
(In thousands)
1994 $ 6,251
1995
1996
1997 44
----------
Total $ 6,295
==========
8. Income taxes
------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities, as of December 31, 1993, were as follows:
<TABLE>
<CAPTION>
1993
-----------
Audited
-----------
(In thousands)
<S> <C>
Deferred tax assets:
Provision for credit losses $ 80
Write-down of other real estate owned 21
Core deposit amortization 3
Other, net 12
-----------
Total deferred tax assets 116
-----------
Deferred tax liabilities:
Depreciation expense ( 73)
-----------
Total deferred tax liabilities ( 73)
-----------
Net deferred tax asset $ 43
===========
</TABLE>
The consolidated provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- ----------
Audited Unaudited
----------- -----------------------
(In thousands)
<S> <C> <C> <C>
Current income tax expense:
Federal $ 661 $ 803 $ 461
State 75 43
----------- ----------- -----------
736 803 504
Deferred income tax expense 86 73
----------- ----------- -----------
Total $ 822 $ 876 $ 504
=========== =========== ===========
</TABLE>
8. Income taxes-continued
----------------------
The consolidated provision for income taxes is less than that
computed by applying the federal statutory rate of 34%, as
indicated in the following analysis:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ------------ ------------
Audited Unaudited
----------- -----------------------
(In thousands)
<S> <C> <C> <C>
Tax based on statutory rate $ 867 $ 1,012 $ 594
State income tax, net of
federal benefit 49 27
Tax effect of permanent
differences ( 95) ( 4) ( 118)
Net operating loss
carryforward ( 130)
Other, net 1 ( 2) 1
----------- ----------- -----------
Total $ 822 $ 876 $ 504
=========== =========== ===========
</TABLE>
9. Earnings per common share
-------------------------
Earnings per common share are based on the number of shares
outstanding of 5,254.5 for 1993, 1992 and 1991.
10. Profit sharing plan
-------------------
First National Bank and Trust Company of Dodge City, a subsidiary
bank, has a noncontributory profit sharing plan covering
substantially all employees. Employees must meet certain criteria
to become eligible to participate in the profit sharing plan. They
must complete 1,000 hours of service during twelve consecutive
months measured from the first day of employment and upon meeting
the requirements may enter the plan on the next entry date (January
1 or July 1). There are no age requirements and employees may make
voluntary contributions. Discretionary employer contributions are
approved by the Board of Directors. Employer contributions were
$160,402 in 1993, $149,205 in 1992 and $142,654 in 1991.
Metro Bank of Broken Arrow is a subsidiary bank of Metro
Bancshares, Inc., a subsidiary of First Dodge City Bancshares,
Inc., has established a 401(k) and a noncontributory profit sharing
plan covering substantially all employees on January 1, 1992.
Employees must meet certain criteria to become eligible to
participate in the 401(k) plan. They must complete 1,000 hours of
service during twelve consecutive months measured from the first
day of employment and have attained the age of 21. Upon meeting
these requirements, the employee may enter the plan on the next
entry date (January 1 or July 1). The plan also contains a
deferred-salary arrangement under Internal Revenue Code Section
401(k) which is partially matched by employer contributions.
Discretionary contributions are approved by the Board of Directors.
Qualified Nonelective Contributions are made in order to satisfy
certain plan antidiscrimination requirements. Employer
contributions were $12,589 in 1993 and $11,332 in 1992.
11. Commitments and contingencies
-----------------------------
In the normal course of business, First Dodge makes various
commitments and incurs certain contingent liabilities that are not
presented in the accompanying consolidated financial statements.
The commitments and contingent liabilities include unused
commitments on lines of credit and commitments to extend standby
letters of credit. Since some of these commitments are expected to
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. At December
31, 1993, unused commitments on lines of credit and commitments
under standby letters of credit were approximately $24,468,000 and
$388,100, respectively. The Company does not anticipate any
material losses as a result of the commitments and contingent
liabilities.
12. Related parties
---------------
In the normal course of business, the Company makes loans and
enters into other transactions with its officers and directors and
their affiliates. The Company's policy relative to officer and
director related loans is to provide terms and conditions identical
to terms and conditions prevailing at the same time for comparable
transactions with other customers. An analysis of aggregate loan
activity with this group follows:
1993
------------
Audited
------------
(In thousands)
Loans outstanding at January 1 $ 1,409
New loans 6,547
Repayments ( 6,341)
Other 13
------------
Loans outstanding at December 31 $ 1,628
============
Other changes include loans outstanding at December 31, 1992, to
officers who terminated employment in 1993, and changes in related
individuals extended lines of credit during 1993.
The bank held demand and other deposits for related parties of
approximately $6,271,000 and $6,397,000, as of December 31, 1993
and 1992, respectively.
13. Regulatory matters
------------------
The Company and its subsidiaries are subject to certain
restrictions set forth by various regulatory agencies. These
restrictions include, among other things, a limitation on the
amount of dividends declared and requirements to maintain minimum
amounts of capital.
14. Condensed financial information of parent corporation
-----------------------------------------------------
In the following condensed financial information of First Dodge
City Bancshares, Inc. (parent only), investments in subsidiaries
are recorded using the equity method of accounting.
First Dodge City Bancshares, Inc. (parent only)
Condensed statement of condition (unaudited):
--------------------------------------------
<TABLE>
<CAPTION>
December 31,
------------------------
1993 1992
----------- -----------
(In thousands)
<S> <C> <C>
Assets:
Cash in subsidiary banks $ 10 $ 10
Investments in bank subsidiaries 14,672 14,252
Other assets (including receivables
from subsidiaries of $72 in
1993 and $20 in 1992) 74 30
Cost in excess of net assets acquired 232 246
----------- -----------
Total assets $ 14,988 $ 14,538
=========== ===========
Liabilities and stockholders equity:
Notes payable $ 6,134 $ 6,585
Subordinated debentures 188 188
Other liabilities (including amounts
owed to subsidiaries of $-0- in 1993
and $11 in 1992) 162 168
----------- -----------
Total liabilities 6,484 6,941
Stockholders' equity 8,504 7,597
----------- -----------
Total liabilities and stockholders' equity $ 14,988 $ 14,538
=========== ===========
</TABLE>
Condensed statements of income (unaudited):
------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Dividends from subsidiaries $ 1,500 $ 1,380 $ 1,055
----------- ----------- -----------
Total income 1,500 1,380 1,055
----------- ----------- -----------
Directors fees 14 14 14
Insurance expense 30 20 13
Interest expense 415 422 519
Amortization of cost in excess
of net assets acquired 15 15 14
Other expenses 10 9 83
----------- ----------- -----------
Total expenses 484 480 643
----------- ----------- -----------
Income before income taxes 1,016 900 412
Income tax benefit 165 253 267
Net income of subsidiaries
in excess of dividends
received 420 741 375
----------- ----------- -----------
$ 1,601 $ 1,894 $ 1,054
=========== =========== ===========
</TABLE>
14. Condensed financial information of parent corporation-continued
---------------------------------------------------------------
Condensed statements of cash flows (unaudited):
----------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Increase (decrease) in cash and
cash equivalents:
Cash flows from operating
activities:
Net income $ 1,601 $ 1,894 $ 1,054
Adjustments to reconcile
net cash provided by
operating activities:
Amortization 14 15 14
Net income of
subsidiaries in
excess of dividends
received ( 420) ( 741) ( 375)
Changes in assets and
liabilities:
Other assets ( 44) 14 47
Other liabilities ( 7) ( 60) ( 47)
----------- ----------- -----------
Net cash provided by
operating activities 1,144 1,122 693
----------- ----------- -----------
Cash flows from investing
activities:
Investment in subsidiaries ( 1,035) ( 1,866)
----------- ----------- -----------
Net cash used in
investment activities ( 1,035) ( 1,866)
----------- ----------- -----------
Cash flows from financing
activities:
Proceeds from purchased
funds and short-term
other borrowings 375
Proceeds from issuance of
long-term debt 1,027 1,131
Repayment of long-
term debt ( 451) ( 416) ( 175)
Dividends on common stock ( 693) ( 750) ( 100)
----------- ----------- -----------
Net cash used in financing
activities ( 1,144) ( 139) 1,231
----------- ----------- -----------
Increase (decrease) in cash
and cash equivalents ( 52) 58
Cash and cash equivalents at
beginning of year 10 62 4
----------- ----------- -----------
Cash and cash equivalents at
end of year $ 10 $ 10 $ 62
=========== =========== ===========
Cash payments for:
Interest $ 411 $ 493 $ 508
=========== =========== ===========
</TABLE>
15. Subsequent event
----------------
On February 25, 1994, First Dodge entered into an Agreement and
Plan of Reorganization ("Agreement") with Fourth Financial
Corporation ("Fourth Financial"). The Agreement provides for the
simultaneous mergers of First Dodge City Bancshares, Inc.
("Bancshares"), First National Bancshares of Dodge City, Inc.
("FNB"), and Metro Bancshares, Inc. ("MBI") into Fourth Financial,
the merger of Metro Bank of Broken Arrow, Broken Arrow, Oklahoma
("Metro Bank") into BANK IV Oklahoma, National Association, and the
merger of First National Bank and Trust Company in Dodge City,
Dodge City, Kansas ("First National") into BANK IV Kansas, National
Association. Consummation of the agreement is conditioned upon
several things, including (i) all governmental approvals being
obtained and continuing in effect, and (ii) receipt by Fourth
Financial of "affiliate agreements" from all persons identified by
it as being "affiliates" within the meaning of Securities and
Exchange Commission rules. In the agreement, all outstanding
capital stock of Bancshares would be converted into an aggregate of
590,711 shares of Fourth Financial Common Stock ("Fourth Stock").
The shares of capital stock of MBI (other than the shares owned by
Bancshares) and all of the capital stock of First National not
owned by FNB would be converted as set out in the Agreement. For
purposes of convenience, cash will be paid in lieu of fractional
shares of Fourth Stock.
The Agreement includes a provision which limits the amount of
dividends that the Company can declare prior to the merger
transaction.
REPORT OF AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed of two
directors. The members of the Audit Committee at December 31, 1993
were John V. Harding and Thomas P. Shirley. This committee held
quarterly meetings during the year ended December 31, 1993.
The Audit Committee has the responsibility to assist the Board of
Directors in performing its fiduciary duty to the existing and
potential stockholders of First Dodge and to the investment community
relating to the accounting and reporting practices and the integrity of
the financial reports of First Dodge. The committee recommended to the
Board of Directors, subject to stockholder approval, the selection of
First Dodge's independent auditors, Smoll, Banning and Neier,
Chartered.
The Audit Committee has discussed with the independent auditors
and the internal auditor the overall scope and specific plans for their
respective audits, First Dodge's consolidated financial statements, and
its internal controls. The committee met regularly with First Dodge's
internal auditor and independent auditors, without management present,
to discuss the results of their audits, First Dodge's internal
controls, and the overall quality of its financial reporting. The
committee has also reviewed the reports of bank regulatory agencies.
The committee was available to discuss, in private, any matter desired
by the internal auditor or the independent auditors.
REPORT OF MANAGEMENT
Management is responsible for the content of the financial
statements and related financial information included in this report.
Management believes that the financial statements have been prepared in
conformity with generally accepted accounting principles appropriate in
the circumstances to reflect, in all material respects, the substances
of events and transactions that should be included. The financial
statements reflect management's judgments and estimates as to the
effects of events and transactions that are accounted for or disclosed.
Management has long recognized the importance of First Dodge's
maintaining and reinforcing the highest possible standards of conduct
in all of its actions, including the preparation and dissemination of
statements fairly presenting the financial condition of First Dodge.
In this regard, it has developed a system of internal accounting
controls which plays an important role in assisting management in
fulfilling its responsibilities in preparing First Dodge's financial
statements. First Dodge's system of internal accounting controls is
designed to provide reasonable assurance that assets are safeguarded
and that transactions are executed in accordance with management's
policies. This system is augmented by a code of ethics which is
monitored and enforced, by written policies and procedures, and by an
independent internal audit staff which reports to the Audit Committee
of the Board of Directors. A description of the Audit Committee's
responsibilities and activities is presented in the accompanying report
of the Audit Committee. Management recognized that because of cost-
benefit considerations and other inherent limitations on the
effectiveness of any internal accounting control system, some errors
and other irregularities may occur. However, management believes that
First Dodge's internal accounting control system provides reasonable
assurance that errors or irregularities that could be material to the
financial statements are prevented or would be detected on a timely
basis and corrected in the normal course of business.
The independent auditors are engaged, in their annual audit
function, to express an opinion on First Dodge's financial statements,
which opinion is to be based on their performance of an audit in
accordance with generally accepted auditing standards.
<TABLE>
<CAPTION
FIRST DODGE CITY BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
---------------------------------------------------
1993 1992 1991(2) 1990(1) 1989
-------- -------- -------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Summary income statement information:
Interest income. . . . . . . . . . . . . . . $ 10,602 $ 11,961 $ 12,468 $ 11,002 $ 11,133
Interest expense . . . . . . . . . . . . . . 4,126 5,264 7,072 6,415 6,536
Net interest income. . . . . . . . . . . . . 6,476 6,697 5,396 4,587 4,597
Net interest income (tax equivalent) (3) . . 6,720 6,805 5,606 4,742 4,796
Provision (benefit) for credit losses. . . . (92) 15 261 527 929
Noninterest income . . . . . . . . . . . . . 1,632 1,642 1,477 1,189 1,014
Noninterest expense. . . . . . . . . . . . . 5,651 5,348 4,866 4,622 4,267
Net income (loss) before cumulative effect of
change in accounting principle. . . . . . . 1,528 1,894 1,054 112 (32)
Cumulative effect of change in
accounting principle. . . . . . . . . . . . 73 -- -- -- --
Net income (loss). . . . . . . . . . . . . . 1,601 1,894 1,054 112 (32)
Net income (loss) applicable to common stock 1,601 1,894 1,054 112 (32)
Per common share data:
Earnings per common share:
Income before extraordinary item and
cumulative effect of change in
accounting principle. . . . . . . . . . . $ 290.80 $ 335.71 $ 200.59 $ 21.32 $ (6.09)
Extraordinary item . . . . . . . . . . . . -- 24.74 -- -- --
Cumulative effect of change in
accounting principle. . . . . . . . . . . 13.89 -- -- -- --
Primary. . . . . . . . . . . . . . . . . . 304.69 360.45 200.59 21.32 (6.09)
Cash dividend. . . . . . . . . . . . . . . 132.08 142.73 19.03 14.27 31.16
Book value per common share. . . . . . . . 1,618.42 1,445.81 1,241.41 1,080.22 1,073.37
Average common shares outstanding (000s) . 5.2545 5.2545 5.2545 5.2545 5.2545
Year-end common shares outstanding (000s). 5.2545 5.2545 5.2545 5.2545 5.2545
Earnings performance ratios (4):
Return on assets . . . . . . . . . . . . . . 1.08% 1.20% .63% .09% (.03)%
Return on total stockholders' equity . . . . 19.45 21.89 13.16 1.02 (.31)
Return on common stockholders' equity. . . . 19.45 21.89 13.16 1.02 (.31)
Summary statement of condition information:
Year-end assets. . . . . . . . . . . . . . . $151,349 $153,259 $162,757 $135,961 $118,650
Year-end loans and leases. . . . . . . . . . 94,292 81,946 86,316 76,227 72,903
Year-end allowance for credit losses . . . . 1,249 1,340 1,334 1,344 1,363
Year-end long-term debt. . . . . . . . . . . 6,295 6,732 6,243 5,089 4,530
Year-end common stockholders' equity . . . . 8,504 7,597 6,523 5,676 5,640
Year-end stockholders' equity. . . . . . . . 8,504 7,597 6,523 5,676 5,640
Average assets . . . . . . . . . . . . . . . 148,509 151,872 149,975 124,717 116,409
Average loans and leases . . . . . . . . . . 84,851 81,822 81,288 69,382 69,445
Average investment securities. . . . . . . . 39,390 38,521 29,742 19,560 15,333
Average deposits . . . . . . . . . . . . . . 124,958 126,079 129,323 113,343 103,315
Average common stockholders' equity. . . . . 8,233 8,333 7,181 5,669 5,732
Average stockholders' equity . . . . . . . . 8,233 8,333 7,181 5,669 5,732
Asset quality ratios:
Allowance for credit losses/year-end
loans and leases. . . . . . . . . . . . . . 1.32% 1.64% 1.55% 1.76% 1.87%
Nonperforming assets/year-end loans plus
other real estate and nonperforming assets. .35 1.95 1.50 2.19 3.68
Allowance for credit losses/year-end
nonperforming loans . . . . . . . . . . . . 603.38 337.53 368.51 132.02 67.44
Net charge-offs/average loans and leases . . -- .01 .33 .49 1.25
Capital ratios:
Stockholders' equity/assets (4). . . . . . . 5.54% 5.49% 4.79% 4.55% 4.92%
Leverage ratio (5):
First National Bank and Trust Co., Inc.. . 8.46 8.03 -- -- --
Metro Bank of Broken Arrow . . . . . . . . 7.85 7.87 -- -- --
Tier I risk-based capital (6):
First National Bank and Trust Co., Inc.. . 12.10 13.35 -- -- --
Metro Bank of Broken Arrow . . . . . . . . 11.74 12.22 -- -- --
Total risk-based capital (6):
First National Bank and Trust Co., Inc.. . 13.28 14.83 -- -- --
Metro Bank of Broken Arrow . . . . . . . . 13.15 13.71 -- -- --
Common dividend payout ratio (7) . . . . . . 43.35 39.60 9.49 66.93 (511.66)
<FN>
- -------------
(1) During 1990, First Dodge assumed core deposits totaling $13,768,000 in the purchase of Valley
Savings.
(2) During 1991, First Dodge assumed core deposits totaling $18,459,000 and loans totaling $10,921,000
in the purchase of Broken Arrow Savings, F.A.
(3) Stated on a tax-equivalent basis assuming a marginal tax rate of 34%.
(4) Based on averages of the quarter end statement of condition items.
(5) Tier I capital/average assets less certain intangibles.
(6) Tier I capital is composed of common stockholders' equity less certain intangibles. Total capital
is Tier I capital plus the allowance for credit losses (using 1993 regulatory guidelines). Both
capital amounts are divided by risk-weighted assets.
(7) Common dividend per share divided by primary earnings per share.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Performance Summary
- -------------------
Net income for 1993 was $1,601,000 compared to $1,894,000 in 1992
and $1,054,000 in 1991. Earnings per share were $304.69, $360.45, and
$200.59 for 1993, 1992, and 1991, respectively. For 1993 return on
assets and return on common equity were 1.08% and 19.45%, respectively.
Return on assets was 1.20% for 1992 and .63% for 1991; return on common
equity was 21.89% and 13.16% for the respective prior periods.
Net income for each of the last three years included
extraordinary gains and nonoperating charges. A new accounting
standard, Financial Accounting Standard ("FAS") No. 109 - Accounting
for Income Taxes, was implemented effective January 1, 1993 and
resulted in an addition to income of $73,000 ($13.83 per share).
An operating charge of $157,000 ($29.88 per share) was taken
during 1993 to record and amortize core deposit intangibles, associated
with purchase of deposits through the RTC of the Dodge City Valley
Savings Association and deposits and loans of Broken Arrow Savings,
F.A. Both 1992 and 1991 financial results also reflected operating
charges related to the purchase of Valley Savings' deposits and Broken
Arrow Savings deposits and loans. These operating charges were
$149,000 ($28.36 per share) in 1992 and $107,000 ($20.36 per share) in
1991.
Net interest income in 1993 decreased by $221,000 to total
$6,476,000 for 1993 as compared to $6,697,000 for last year. Total
average interest-earning assets were $133 million for 1993 and $131
million for 1992. Comparing 1993 and 1992, average loans increased
$3.4 million, while average investment securities increased $.9
million.
First Dodge actually received a credit for loan losses of $92,000
in 1993. The provision reflects net recoveries of loan losses for the
year and improved asset quality in the loan portfolio plus a strong
allowance for loan losses. At December 31, 1993, nonperforming assets
were $327,000, down from $1,618,000 at December 31, 1992. Net
(recoveries) charge-offs were $1,000 and $9,000, respectively, in 1993
and 1992. The allowance for credit losses was $1,249,000 at December
31, 1993, compared to $1,340,000 for 1992.
Noninterest income was $1,632,000 in 1993, a $10,000 decrease
over the 1992 noninterest income of $1,642,000. Service charges on
deposit accounts increased $37,000; brokerage sales commissions
increased $82,000 in 1993; and trust fees increased $67,000.
Noninterest expenses increased 5.7% to total $5,651,000 in 1993.
Net income decreased $293,000 between 1992 and 1993. The
increased net income of $840,000 reflected in a comparison of results
of operations for 1992 and 1991 can be attributed to increased net
interest income and a decreased provision for credit losses. The
$1,301,000 increase in net interest income between 1992 and 1991 was
due to an increased widening of spreads between the yields on earning
assets and the rates paid on interest-bearing liabilities. The $15,000
provision for credit losses for 1992 was $246,000 less than the 1991
provision for credit losses. The 1991 provision for credit losses was
$261,000.
Net Interest Income
- -------------------
For 1993, net interest income amounted to $6,476,000,
representing a decrease of $221,000 or 3.30% under the $6,697,000
earned during 1992. On a fully tax-equivalent basis, net interest
income decreased 1.2% from $6,805,000 in 1992 to total $6,720,000 in
1993. On a fully tax-equivalent basis, the yield on earning assets
decreased to 5.06% in 1993 compared to 5.20% in 1992.
Net interest income of $6,697,000 for 1992 represented an
increase of $1,199,000 over the $5,396,000 earned during 1991. As
interest rates declined during 1992, interest-bearing liabilities
repriced faster than interest-earning assets, causing the net yield on
earning assets, on a fully tax-equivalent basis, to widen to 5.20% in
1992 from 4.30% in 1991.
The following table summarizes the changes in net interest income
on a fully tax-equivalent basis, by major category of interest-earning
assets and interest-bearing liabilities, identifying changes related to
volumes, rates, and changes related to both volumes and rates.
Nonaccrual loans are included in the loan volumes used to calculate the
following analysis of net interest income; however, interest collected
on such loans is usually recorded as a reduction in loans outstanding
and is excluded from interest income.
<TABLE>
<CAPTION>
1993 vs 1992
---------------------------------------------
Change
Total Attributable to
-----------------------------------
Change Volume Yield/Rate Combination
-------- -------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Loans and leases(1). . . . . . . . . . . . . . . . $ (475) $ 320 $ (769) $ (26)
Interest-bearing deposits in
other financial institutions. . . . . . . . . . . (149) (149) (1) 1
Federal funds sold and securities
purchased under agreements to resell. . . . . . . (24) 18 (39) (3)
Taxable investment securities. . . . . . . . . . . (975) (441) (641) 107
Tax-preferred investment securities(1) . . . . . . 400 603 (70) (133)
-------- -------- ---------- ----------
Total interest income change . . . . . . . . . . (1,223) 351 (1,520) (54)
-------- -------- ---------- ----------
Interest expense:
Savings and interest checking. . . . . . . . . . . (275) 1,127 (7) (1,395)
Time deposits. . . . . . . . . . . . . . . . . . . (765) (86) (701) 22
Federal funds purchased and securities
sold under agreements to repurchase . . . . . . . (77) (34) (49) 6
Debt . . . . . . . . . . . . . . . . . . . . . . . (21) 1 (22) --
-------- -------- ---------- ----------
Total interest expense change. . . . . . . . . . (1,138) 1,008 (779) (1,367)
-------- -------- ---------- ----------
Decrease in net interest income (1). . . . . . . . . (85)
Decrease in taxable equivalent adjustment. . . . . . (136)
--------
Net interest income change . . . . . . . . . . . . . $ (221)
========
</TABLE>
<TABLE>
<CAPTION>
1992 vs 1991
---------------------------------------------
Change
Total Attributable to
-----------------------------------
Change Volume Yield/Rate Combination
-------- -------- ------------ -----------
(In thousands)
<S> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Loans and leases(1). . . . . . . . . . . . . . . . $ (343) $ 59 $ (398) $ (4)
Interest-bearing deposits in
other financial institutions. . . . . . . . . . . (401) (350) (118) 67
Federal funds sold and securities
purchased under agreements to resell. . . . . . . (273) (181) (142) 50
Taxable investment securities. . . . . . . . . . . 709 603 80 26
Tax-preferred investment securities(1) . . . . . . (301) 98 (345) (54)
-------- -------- ---------- ----------
Total interest income change . . . . . . . . . . (609) 229 (923) 85
-------- -------- ---------- ----------
Interest expense:
Savings and interest checking. . . . . . . . . . . (593) 51 (629) (15)
Time deposits. . . . . . . . . . . . . . . . . . . (1,212) (367) (922) 77
Federal funds purchased and securities
sold under agreements to repurchase . . . . . . . 106 281 (75) (100)
Debt . . . . . . . . . . . . . . . . . . . . . . . (109) 80 (165) (24)
-------- -------- ---------- ----------
Total interest expense change. . . . . . . . . . (1,808) 45 (1,791) (62)
-------- -------- ---------- -----------
Increase in net interest income (1). . . . . . . . . 1,199
Increase in taxable equivalent adjustment. . . . . . 102
--------
Net interest income change . . . . . . . . . . . . . $ 1,301
========
<FN>
- --------
(1) Computed on a tax-equivalent basis assuming a marginal tax rate of 34%.
</TABLE>
The following table presents an analysis of average rates and yields on a
fully tax-equivalent basis for 1993, 1992 and 1991.
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------- ------------------------- --------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
-------- -------- ------ -------- -------- ------ -------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-Earning Assets:
Loans and leases(2). . . . . . . . . $ 84,851 $ 8,175 9.63% $ 81,822 $ 8,650 10.57% $ 81,288 $ 8,993 11.06%
Unearned income-loans. . . . . . . . (37) -- N/A (42) -- N/A (49) -- N/A
Interest-bearing deposits in other
financial institutions. . . . . . . 1,036 60 5.79 3,593 209 5.82 8,443 610 7.22
Federal funds sold and securities
purchased under agreements to resell 7,458 219 2.94 6,942 243 3.50 10,687 516 4.83
Investment securities:
Taxable. . . . . . . . . . . . . . 29,174 1,675 5.74 35,002 2,650 7.57 26,703 1,941 7.27
Tax-preferred(1) . . . . . . . . . 10,216 717 7.02 3,519 317 9.01 3,039 618 20.34
-------- -------- -------- -------- -------- --------
Total interest-earning
assets(1) . . . . . . . . . . . . 132,698 10,846 8.17 130,836 12,069 9.22 130,111 12,678 9.74
-------- -------- --------
Cash and due from banks. . . . . . . 7,642 8,873 8,541
Bank premises and equipment. . . . . 2,794 1,904 1,743
Income receivable and other assets . 3,625 8,526 8,018
Intangible assets, net . . . . . . . 3,070 3,100 2,920
Allowance for credit losses. . . . . (1,320) (1,367) (1,358)
-------- -------- --------
Total assets . . . . . . . . . . . . . . $148,509 $151,872 $149,975
======== ======== ========
Liabilities And Stockholders' Equity:
Interest-Bearing Liabilities:
Interest-bearing deposits:
Interest checking. . . . . . . . . $ 32,500 $ 757 2.33% $ 34,551 $ 1,000 2.89% $ 33,872 $ 1,504 4.44%
Savings. . . . . . . . . . . . . . 7,443 180 2.42 7,142 212 2.97 6,679 301 4.51
Time under $100,000. . . . . . . . 48,406 2,020 4.17 50,616 2,648 5.23 53,942 3,531 6.55
Time over $100,000 . . . . . . . . 13,634 513 3.76 13,076 650 4.97 15,389 979 6.36
-------- -------- -------- -------- -------- --------
Total interest-bearing deposits. . . 101,983 3,470 3.40 105,385 4,510 4.28 109,882 6,315 5.75
Debt . . . . . . . . . . . . . . . . 6,592 419 6.36 6,580 440 6.69 5,740 549 9.56
Federal funds purchased and agreements
to repurchase . . . . . . . . . . . . 7,762 237 3.05 8,692 314 3.61 3,696 208 5.63
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities . 116,337 4,126 3.55 120,657 5,264 4.36 119,318 7,072 5.93
-------- --------
Noninterest-bearing deposits . . . . . 22,975 20,694 19,441
Accrued interest, taxes, and
other liabilities . . . . . . . . . . 964 2,188 4,035
-------- -------- --------
Total liabilities. . . . . . . . . . 140,276 143,539 142,794
-------- -------- --------
Preferred stockholders' equity . . . . -- -- --
Common stockholders' equity. . . . . . 8,233 8,333 7,181
-------- -------- --------
Total stockholders' equity . . . . . 8,233 8,333 7,181
-------- -------- --------
Total liabilities and
stockholders' equity. . . . . . . . . . $148,509 $151,872 $149,975
======== ======== ========
Net interest income. . . . . . . . . . . $ 6,720 $ 6,805 $ 5,606
======== ======== ========
Rate analysis:
Interest income/interest-earning assets 8.17% 9.22% 9.74%
Interest expense/interest-earning
assets. . . . . . . . . . . . . . . . 3.11 4.02 5.44
------ ------ ------
Net yield on earning assets. . . . . 5.06% 5.20% 4.30%
====== ====== ======
<FN>
- ------------
(1) Income and rates are stated on a tax-equivalent basis assuming a marginal tax rate of 34%
(2) Nonaccrual loans are included in loans and leases.
</TABLE>
Provision (Benefit) for Credit Losses
- -------------------------------------
The provisions (benefits) for credit losses were $92,000,
$15,000, and $261,000 for 1993, 1992, and 1991, respectively. The
lower provision for credit losses in 1993 and 1992 reflects the
continued improvement in credit quality as demonstrated by a lower
level of nonperforming loans and lower net charge-offs and the strong
allowance for credit losses. Net recoveries for 1993 totaled $1,000 as
compared to net charge-offs of $9,000 for 1992 and net charge-offs of
$271,000 for 1991. Nonperforming loans at December 31, 1993 were
$207,000, down from $397,000 at year-end 1992 and $362,000 at year-end
1991. The allowance for credit losses was $1,249,000, $1,340,000, and
$1,334,000 at December 31, 1993, 1992, and 1991, respectively. The
ratio of allowance for credit losses to nonperforming loans decreased
to 1.32% at December 31, 1993, compared with 1.64% at December 31,
1992 and 1.55% at December 31, 1991.
Noninterest Income
- ------------------
Total noninterest income was $1,632,000 for 1993,
representing a decrease of $10,000 or .6% over the $1,642,000 recorded
in 1992. Included in 1993 noninterest income were $174,000 of
investment securities gains, compared to $384,000 of similar gains
realized in 1992.
The most significant changes in noninterest income between 1993
and 1992 occurred in service charges on deposit accounts, brokerage
sales commissions, and trust fees. The $37,000 or 4.6% increase in
service charges was attributable to both consumer and commercial
customers. These increased revenues were due to a reduction in waived
fees and an increase in service charges. The $96,000 increase in other
fees was primarily attributed to brokerage sales fees for new sales and
products, particularly in the sale of mutual funds. These products are
now available and the low interest rates on deposits continue to make
them more attractive to certain customers as alternative investments to
interest-bearing deposits. Trust fees increased $67,000 to a total of
$267,000 in 1993. The increased fees were principally attributable to
the addition of trust accounts established at the bank.
Total noninterest income was $1,642,000 for 1992, as compared to
$1,477,000 for 1991.
The following table provides an analysis of noninterest income
segregated between fees collected in the normal course of business and
other revenues for the past three years.
<TABLE>
<CAPTION>
Percent Change
---------------
Year Ended December 31, 1992- 1991-
----------------------------
1993 1992 1991 1993 1992
-------- -------- -------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Fee income:
Trust fees . . . . . . . . . . . . . . . . . . . .$ 267 $ 201 $ 219 33.3% (8.2)%
Service charges on deposit accounts. . . . . . . . 844 807 826 4.6 (2.3)
Other. . . . . . . . . . . . . . . . . . . . . . . 330 234 371 40.6 (36.9)
-------- -------- --------
Total fee income . . . . . . . . . . . . . . . . 1,441 1,242 1,416 16.0 (12.3)
-------- -------- --------
Other revenues:
Investment securities gains. . . . . . . . . . . . 174 384 -- (54.7) N/A
Other. . . . . . . . . . . . . . . . . . . . . . . 17 16 61 6.3 (73.8)
-------- -------- --------
Total other revenues . . . . . . . . . . . . . . 191 400 61 (52.3) 555.7
-------- -------- --------
Total non-interest income. . . . . . . . . . . . . .$ 1,632 $ 1,642 $ 1,477 (.6) 11.2
======== ======== ========
Fee income/average assets. . . . . . . . . . . . . .97% .82% .94%
Noninterest income/average assets. . . . . . . . . 1.10% 1.08% .98%
</TABLE>
Noninterest Expense
- --------------------
Noninterest expense amounted to $5,651,000, $5,348,000, and
$4,866,000 for 1993, 1992, and 1991, respectively. Noninterest expense
for each of these years includes certain nonoperating items such as net
costs of operation of other real estate and nonperforming assets.
Net costs of operation of other real estate and nonperforming
assets were $353,000 in 1993, $92,000 in 1992, and $29,000 in 1991.
The increased net costs of nonperforming asset properties in 1993 were
principally attributable to write-downs.
Operating expense increased $42,000 or .8% to total $5,298,000
for 1993.
Between 1992 and 1991 operating expense increased $419,000 or
8.7%. This increase reflected a $221,000 increase in salary and
employee benefits.
The following table presents an analysis of noninterest expense
for the past three years.
<TABLE>
<CAPTION>
Percent Change
---------------
Year Ended December 31, 1992- 1991-
----------------------------
1993 1992 1991 1993 1992
-------- -------- -------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits . . . . . . . . . . .$ 2,716 $ 2,518 $ 2,297 7.9% 9.6%
Net occupancy. . . . . . . . . . . . . . . . . . . . 548 550 567 (.4) (3.0)
FDIC insurance . . . . . . . . . . . . . . . . . . . 277 290 248 (4.5) 16.9
Professional fees. . . . . . . . . . . . . . . . . . 133 187 130 (28.9) 43.8
Advertising and public relations . . . . . . . . . . 119 113 125 5.3 (9.6)
Data processing. . . . . . . . . . . . . . . . . . . 193 183 217 5.5 (15.7)
Supplies and postage . . . . . . . . . . . . . . . . 176 198 166 (11.1) 19.3
Amortization of core deposit intangible. . . . . . . 157 149 107 5.4 39.3
Other. . . . . . . . . . . . . . . . . . . . . . . . 979 1,068 980 (8.3) 9.0
-------- -------- --------
Total operating expense. . . . . . . . . . . . . . 5,298 5,256 4,837 .8 8.7
Net costs of operation of other real estate and
nonperforming assets. . . . . . . . . . . . . . . . 353 92 29 283.7 217.2
-------- -------- --------
Total noninterest expense. . . . . . . . . . . . .$ 5,651 $ 5,348 $ 4,866 5.7 9.9
======== ======== ========
Noninterest expense/average assets . . . . . . . . . 3.81% 3.52% 3.24%
Noninterest expense less noninterest
income/average assets . . . . . . . . . . . . . . . 2.71% 2.44% 2.26%
Operating expense less fee
income/average assets . . . . . . . . . . . . . . . 2.60% 2.64% 2.28%
Operating expense/fee income plus tax-equivalent
net interest income. . . . . . . . . . . . . . . . 64.92% 65.32% 68.88%
</TABLE>
Income Taxes
- ------------
Effective January 1, 1993, First Dodge changed its method of
accounting for income taxes from the deferred method to the liability
method required by Financial Accounting Standard ("FAS") No. 109,
"Accounting for Income Taxes". As permitted under the new rules, prior
years' financial statements have not been restated. The cumulative
effect of adopting FAS No. 109 as of January 1, 1993 was to increase
net income by $73,000.
Income tax expense amounted to $822,000, $876,000, and $504,000
for 1993, 1992, and 1991, respectively.
Statements of Condition
- -----------------------
Total assets amounted to $151.3 million, $153.3 million, and
$162.8 million at December 31, 1993, 1992 and 1991, respectively.
Loans
- -----
Period-end loans increased $12.3 million or 15.1% to total $94.3
million at December 31, 1993. Increases were realized in various
commercial and retail categories. The consumer portfolio declined
$105.6,000 or 9.4%.
Loans to farmers increased $5.0 millon in 1993 which represents
a 19.0% increase and reflects a strong agricultural economy in the
marketplace. Commercial loans increased $5.3 million in 1993 which is
a 34.5% increase over 1992.
Between December 31, 1991 and 1992 total loans decreased $4.4
million representing 5.1% and loans increased $10.1 million
representing 13.23% between 1990 and 1991. Total loans increased by
$3.3 million or 4.6% from December 31, 1989 to 1990.
The following table shows the composition of loans and leases for
the past five years.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . . .$ 20,762 $ 15,438 $ 16,059 $ 16,014 $ 18,093
Real estate, less unearned discount:
Construction. . . . . . . . . . . . . . . . . 3,834 3,088 1,976 978 1,512
Secured by 1-4 family residences. . . . . . . 13,561 11,715 14,725 8,313 8,251
Permanent commercial real estate and other. . 14,325 13,606 12,607 13,273 13,053
Loans to individuals . . . . . . . . . . . . . . 8,716 9,875 10,098 6,798 5,069
Credit card. . . . . . . . . . . . . . . . . . . 1,445 1,342 1,213 815 --
Agriculture. . . . . . . . . . . . . . . . . . . 31,361 26,359 28,973 25,963 26,509
Other . . . . . . . . . . . . . . . . . . . . . 288 523 665 4,073 416
-------- -------- -------- -------- --------
Total loans and leases . . . . . . . . . .$ 94,292 $ 81,946 $ 86,316 $ 76,227 $ 72,903
======== ======== ======== ======== ========
</TABLE>
Commercial and Industrial: First Dodge's commercial and
industrial loans generally are made to middle market and small
businesses. There are no highly leveraged transactions.
Agriculture: Loans secured by grain, cattle and farm operating
expenses accounted for the majority of the agriculture portfolio at
December 31, 1993. The remainder of the agriculture portfolio is
secured by equipment and other farm assets.
Real Estate: Most of the construction loans are for 1-4 family
residential construction and development.
The 1-4 family residence portfolio consists of loans secured by
residences located primarily in Dodge City, Kansas, Southwest Kansas,
Broken Arrow, Oklahoma, and Coweta, Oklahoma, and is principally
permanent first mortgage loans with the remainder consisting of home
equity loans.
Permanent commercial real estate loans include loans in First
Dodge's market for small office buildings/parks; neighborhood strip
shopping centers; small manufacturing machine shop buildings; office
warehouse properties; medical offices; and loans for purposes other
than funding the acquisition of the collateral properties and in which
cash flows from the properties are not the principal source of
repayment. Also included in this portfolio are loans for the financing
of agricultural farm real estate which represent $7.4 million on
December 31, 1993.
Maturity Distribution and Interest Sensitivity of Loans
- -------------------------------------------------------
The maturity distribution of loans outstanding as of December 31,
1993 (excluding consumer, credit card, educational, and lease
financing) by type and sensitivity to changes in interest rates are
shown in the table below. The current portion as well as the long-term
portion of the loan is included in the maturity group applying to the
loan.
<TABLE>
<CAPTION>
Remaining Maturity
---------------------------------------
Over One
Year Over
One Year Through Five
or Less Five Years Total
-------- -------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Loans with fixed interest rates:
Commercial and industrial. . . . . . . . . . . . . . . .$ 5,944 $ 5,990 $ 426 $ 12,360
Real estate. . . . . . . . . . . . . . . . . . . . . . . 2,673 5,173 5,198 13,044
Agriculture. . . . . . . . . . . . . . . . . . . . . . . 827 4,657 120 5,604
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 2,744 3,788 183 6,715
-------- -------- -------- --------
Total loans with fixed interest rates. . . . . . . . . . .$ 12,188 $ 19,608 $ 5,927 $ 37,723
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Repricing Frequency
---------------------------------------
Less Freq Every
Than Five Years
One Year Every Or More
or Less Five Freq Total
-------- -------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Loans with floating interest rates:
Commercial and industrial. . . . . . . . . . . . . . . .$ 8,626 $ 154 $ 111 $ 8,891
Real estate. . . . . . . . . . . . . . . . . . . . . . . 12,637 259 381 13,277
Agriculture. . . . . . . . . . . . . . . . . . . . . . . 25,666 -- -- 25,666
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 4,465 11 73 4,549
-------- -------- -------- --------
Total loans with floating interest rates . . . . . . . . .$ 51,394 $ 424 $ 565 $ 52,383
======== ======== ======== ========
</TABLE>
Real estate loans include construction, permanent commercial,
and other real estate.
Nonperforming Assets
- --------------------
Nonperforming assets consist of nonaccrual loans, troubled debt
restructurings, and other real estate and nonperforming assets. A loan
is placed on nonaccrual status when principal or interest is due and
has remained unpaid for 90 days or more unless the loan is both well
secured and in the process of collection. A currently performing loan
also may be placed on nonaccrual status when there is reasonable doubt
as to the ability of the borrower to continue to pay principal or
interest. Nonaccrual loans at December 31, 1993 included $207,000 of
these "performing/nonperforming" loans. Other real estate and
nonperforming assets include assets acquired from loan settlements and
foreclosures.
During 1993, banking regulators issued guidance confirming that
the loss recognition on collateral dependent loans should be based on
the fair value of the collateral, but that such loans need not be
reported as "Other real estate" unless possession of the underlying
collateral has been obtained.
Generally, principal and interest payments received on nonaccrual
loans are applied as reductions of principal. For this reason and
because of charge-offs, the book value of such loans understates the
remaining contractual obligation of the borrowers. As of December 31,
1993, the carrying value of nonaccrual loans had been charged down to
39.3% of the customers' contractual principal obligations. Also, the
carrying values of other real estate and nonperforming assets had been
written down to current estimates of their fair values less a reserve
for the estimated costs to sell the properties.
The following table presents nonperforming assets and those loans
which are contractually past due 90 days or more as to principal or
interest payments at December 31 for the past five years.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans . . . . . . . . . . . . . . . .$ 207 $ 397 $ 362 $ 1,018 $ 2,021
Troubled debt restructurings . . . . . . . . . . -- -- -- -- --
-------- -------- -------- -------- --------
Total nonperforming loans. . . . . . . . . . . 207 397 362 1,018 2,021
Other real estate and nonperforming assets
(including substantive repossessions), net. . . 120 1,221 946 664 684
-------- -------- -------- -------- --------
Total nonperforming assets . . . . . . . . . .$ 327 $ 1,618 $ 1,308 $ 1,682 $ 2,705
======== ======== ======== ======== ========
Past due loans (90 days or more) . . . . . . . .$ 36 $ 330 $ 552 $ 738 $ 1,223
======== ======== ======== ======== ========
Nonperforming assets/year-end loans plus
other real estate and nonperforming assets. . . .35% 1.95% 1.50% 2.19% 3.68%
Nonperforming assets/year-end assets . . . . . . .22% 1.06% .80% 1.24% 2.28%
</TABLE>
Nonperforming assets decreased $1.3 million or 79.8% from
December 31, 1992 to total $327,000 at the end of 1993. At December
31, 1993, total nonperforming assets represented .35% of total loans
plus other real estate owned and nonperforming assets and .22% of total
assets as compared to 1.95% and 1.06%, respectively, at December 31,
1992.
Management continues to focus on asset quality. An emphasis is
placed on pro-active management of problem credits, early detection of
potential problems, and timely charge-offs. A separate work-out plan
is developed for the resolution and collection of problem assets. An
analysis of nonperforming loans by type is provided in the following
table. There are no significant concentrations of nonperforming assets
in any one market or industry.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . . .$ 94 $ 136 $ 309 $ 800 $ 1,336
Real estate. . . . . . . . . . . . . . . . . . . 73 260 46 218 663
Consumer . . . . . . . . . . . . . . . . . . . . 40 1 7 -- 22
Credit card. . . . . . . . . . . . . . . . . . . -- -- -- -- --
Lease financing. . . . . . . . . . . . . . . . . -- -- -- -- --
-------- -------- -------- -------- --------
Total nonperforming loans. . . . . . . . . . .$ 207 $ 397 $ 362 $ 1,018 $ 2,021
======== ======== ======== ======== ========
</TABLE>
Potential Problem Loans
- -----------------------
Certain loans classified for regulatory purposes as doubtful,
substandard, or special mention are included in the nonperforming loan
table.
Allowance for Credit Losses
- ---------------------------
The allowance for credit losses is the amount deemed by
management to be reasonably necessary to provide for possible losses on
loans that may become uncollectible. Additions to the allowance are
charged to expense as the provision for credit losses. Loan losses and
recoveries are charged or credited directly to the allowance. It is
First Dodge's policy to charge off any loan or portion of that loan
when it is deemed to be uncollectible in the ordinary course of
business.
An evaluation of the overall quality of the portfolio is
performed to determine the necessary level of the allowance for credit
losses. This evaluation takes into consideration the classification of
loans and the application of loss estimates to these classifications.
It is the responsibility of management to classify its loans as pass,
special mention, substandard, doubtful, or loss. The classification
criteria are established by the loan discount committee of First Dodge
and are intended to be consistent with the criteria applied by federal
banking system examiners. These classifications take into
consideration all sources of repayment, underlying collateral, the
value of such collateral, and current and anticipated economic
conditions, trends, and uncertainties. First Dodge has an independent
loan review function which periodically reviews the loans and the
classifications.
Loss factors are developed by loan type and classification using
historical loss data and statistical modeling techniques. The
application of these loss factors to the portfolio classifications
combined with analyses of general economic conditions, trends in
portfolio volume, maturity, and composition, and estimates of potential
future losses on specific large loans and those loans requiring special
attention provide management with data essential to identify and
estimate the credit risk inherent in the portfolio. The allowance for
credit losses reflects the result of these estimates, and is deemed to
be adequate at each balance sheet date.
As of December 31, 1993, the allowance for credit losses equaled
$1,249,000 or 1.32% of total loans and leases and 603.38% of
nonperforming loans. Comparatively, the allowance for credit losses
amounted to $1,340,000 or 1.64% of total loans and 337.53% of
nonperforming loans at December 31, 1992. The increased level of net
recoveries in 1993 and 1992 and the sound coverage ratio of the
allowance for credit losses to nonperforming loans at December 31, 1993
reflected the continuing emphasis management is placing on resolving
problem loans, reducing the risk profile of First Dodge, and prudently
reserving for identifiable risks.
The allowance for credit losses has been allocated by loan
category. It should be recognized that such allocations are not
necessarily indicative of future loan losses and that all of such
allowance is available to absorb losses on loans for any category. The
allocation of the allowance for credit losses by loan type is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . . .$ 267 $ 288 $ 288 $ 379 $ 429
Real estate:
Construction . . . . . . . . . . . . . . . . . 45 34 26 23 36
Secured by 1-4 family residences . . . . . . . 204 177 196 133 147
Permanent commercial real estate . . . . . . . 180 181 158 175 172
Loans to individuals . . . . . . . . . . . . . . 110 135 133 92 81
Credit cards . . . . . . . . . . . . . . . . . . 24 26 28 17 --
Agriculture. . . . . . . . . . . . . . . . . . . 408 480 485 472 482
Other. . . . . . . . . . . . . . . . . . . . . . 11 19 20 53 16
-------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . .$ 1,249 $ 1,340 $ 1,334 $ 1,344 $ 1,363
======== ======== ======== ======== ========
</TABLE>
The following table compares the allocation of the allowance for
credit losses by loan type expressed as a percentage of the total
allowance for credit losses to the percentage of loans in each loan type
to total loans:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . . . 21.38% 21.49% 21.59% 28.20% 31.48%
Real estate:
Construction . . . . . . . . . . . . . . . . . 3.60 2.54 1.95 1.71 2.64
Secured by 1-4 family residences . . . . . . . 16.33 13.21 14.69 9.90 10.79
Permanent commercial real estate . . . . . . . 14.41 13.51 11.84 13.02 12.62
Loans to individuals . . . . . . . . . . . . . . 8.81 10.07 9.97 6.85 5.94
Credit cards . . . . . . . . . . . . . . . . . . 1.92 1.94 2.10 1.26 --
Agriculture. . . . . . . . . . . . . . . . . . . 32.67 35.82 36.36 35.12 35.36
Other. . . . . . . . . . . . . . . . . . . . . . .88 1.42 1.50 3.94 1.17
-------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ========
</TABLE>
The following table summarizes the changes in the allowance for
credit losses for the past five years and presents selected related
ratios.
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------
1993 1992 1991 1990 1989
------------ --------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, as
previously reported . . . . . . . . . . $ 1,340 $ 1,334 $ 1,344 $ 1,363 $ 1,300
------------ --------- -------- -------- --------
Charge-offs:
Commercial and industrial. . . . . . . 15 252 236 295 664
Real estate. . . . . . . . . . . . . . -- 31 15 87 272
Consumer . . . . . . . . . . . . . . . 35 59 48 25 44
Credit card. . . . . . . . . . . . . . 15 21 2 -- --
Lease financing. . . . . . . . . . . . -- -- -- -- --
Other. . . . . . . . . . . . . . . . . -- -- -- -- --
------------ --------- -------- -------- --------
Total charge-offs. . . . . . . . . . 65 363 301 407 980
------------ --------- -------- -------- --------
Recoveries:
Commercial and industrial. . . . . . . 36 340 25 52 58
Real estate. . . . . . . . . . . . . . 19 -- -- 2 38
Consumer . . . . . . . . . . . . . . . 10 14 5 11 18
Credit card. . . . . . . . . . . . . . 1 -- -- -- --
Lease financing. . . . . . . . . . . . -- -- -- -- --
Other. . . . . . . . . . . . . . . . . -- -- -- -- --
------------ --------- -------- -------- --------
Total recoveries . . . . . . . . . . 66 354 30 65 114
------------ --------- -------- -------- --------
Net loans and leases (recoveries)
charge-offs . . . . . . . . . . . . . . (1) 9 271 342 866
Provision (benefit) for credit losses. . (92) 15 261 323 929
------------ --------- -------- -------- --------
Balance at December 31 . . . . . . . . . $ 1,249 $ 1,340 $ 1,334 $ 1,344 $ 1,363
============ ========= ======== ======== ========
Loans and leases at year end . . . . . . $ 94,292 $ 81,946 $ 86,316 $ 76,227 $ 72,903
Average loans and leases . . . . . . . . $ 84,851 $ 81,822 $ 81,288 $ 69,382 $ 69,445
Net charge-offs/average loans and leases --% .01% .33% .49% 1.25%
Allowance for credit losses/net
charge-offs . . . . . . . . . . . . . . (124,900.00)% 14,888.89% 492.25% 392.98% 157.39%
Allowance for credit losses/year end
nonperforming loans . . . . . . . . . . 603.38% 337.53% 368.51% 132.02% 67.44%
Allowance for credit losses/year end
nonperforming assets. . . . . . . . . . 381.96% 82.82% 101.99% 79.90% 50.39%
Allowance for credit losses/year end
loans and leases. . . . . . . . . . . . 1.32% 1.64% 1.55% 1.76% 1.87%
</TABLE>
Investment Portfolio
- --------------------
The year-end book value of investment securities at December 31
for each of the last three years is presented in the table below.
Held-to-maturity
<TABLE>
<CAPTION>
December 31,
----------------------------
1993 1992 1991
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
U.S. Treasury obligations. . . . . . . . . . . . . . . . . . . . . .$ 14,815 $ 15,851 $ 13,159
Obligations of U.S. government agencies
and corporations:
Mortgage-backed. . . . . . . . . . . . . . . . . . . . . . . . . . 2,001 6,186 6,079
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,900 13,341 11,553
Obligations of state and political subdivisions. . . . . . . . . . . 12,088 6,864 2,425
Other securities:
Privately issued collateralized mortgage obligations . . . . . . . 217 314 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 576 577
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 33,095 $ 43,132 $ 33,793
======== ======== ========
Market value in excess of book value . . . . . . . . . . . . . . . .$ 396 $ 581 $ 1,076
======== ======== ========
</TABLE>
Effective for the first quarter of 1994, First Dodge adopted a
policy of classifying all United States Treasury securities and
obligations of United States government corporations and agencies with
maturities of five years or less as "available for sale" in accordance
with the guidelines of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities".
Investment securities decreased $10.0 million between December
31, 1992 and 1993. The decrease is attributable to First Dodge
becoming more fully invested through lending opportunities in 1993.
Excluding U.S. Treasury obligations and obligations of U.S.
government agencies and corporations, there were no security holdings
of any one issuer at December 31, 1993 that exceeded 10% of
consolidated stockholders' equity.
The tables below summarize the maturity and yield distribution of
investment securities at December 31, 1993.
<TABLE>
<CAPTION>
Maturing
-----------------------------------------------------------------------------------------
After one After five
Within but within but within After
one year five years ten years ten years Total
----------------- ---------------- ---------------- ---------------- -----------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
-------- ------ -------- ------ -------- ------ -------- ------ -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations. . . . . $ 5,668 5.06% $ 9,147 4.88% $ -- --% $ -- --% $ 14,815 4.95%
Obligations of U.S. government
agencies and corporations:
Mortgage-backed. . . . . . . . . -- -- -- -- 1,894 6.42 107 8.67 2,001 6.54
Other. . . . . . . . . . . . . . 1,900 8.28 2,000 6.59 -- -- -- -- 3,900 7.41
Obligations of states and
political subdivisions. . . . . . 450 4.25 7,509 4.13 4,129 4.89 -- -- 12,088 4.37
Privately issued collateralized
mortgage obligations. . . . . . . -- -- -- -- -- -- 217 7.05 217 7.05
Federal reserve stock. . . . . . . -- -- -- -- -- -- 48 6.00 48 6.00
Other (1). . . . . . . . . . . . . -- -- -- -- -- -- 26 N/A 26 N/A
-------- ------ -------- ------ -------- ------ -------- ------ --------- -------
Total. . . . . . . . . . . . . . . $ 8,018 5.77% $ 18,656 4.75% $ 6,023 5.38%$ 398 7.38% $ 33,095 5.14%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
<FN>
- ------------
(1) 200 shares of Bankers Bancorp of Oklahoma, Inc. common class "A" voting stock.
</TABLE>
Scheduled principal reductions and prepayments on the mortgage-
backed securities approximated $1,483,000 during the fourth quarter of
1993. The volume of principal reductions and prepayments combined with
First Dodge's strong liquidity position (which is described in the
Asset and Liability Management Section) demonstrates First Dodge's
ability to hold a substantial portion of its investment securities to
maturity.
Deposits
- --------
Average total deposits decreased $1.1 million or .9% between
December 31, 1993 and 1992. At December 31, 1993, average total
deposits were $124.9 million which compares to $126.0 million deposits
at December 31, 1992. Certain customers have reinvested maturing
deposits in alternative investment instruments and some of these
customers have purchased mutual funds and other investments through the
investment company, resulting in increased fee income. Core deposits
(demand, interest checking, savings, and time deposits under $100,000)
represented 89.1% of total deposits at December 31, 1993 compared to
89.6% at December 31, 1992.
The following table provides a breakdown of average deposits
and average rates paid, by type, for the past three years.
<TABLE>
<CAPTION>
1993 1992 1991
----------------- ------------------ ------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
-------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits . . . . .$ 22,975 --% $ 20,694 --% $ 19,441 --%
-------- -------- --------
Interest-bearing deposits:
Interest-bearing checking deposits . 32,500 2.33% 34,551 2.89% 33,872 4.44%
Savings deposits . . . . . . . . . . 7,443 2.42% 7,142 2.97% 6,679 4.51%
Time deposits under $100,000 . . . . 48,406 4.19% 50,616 5.23% 53,942 5.73%
Time deposits of $100,000 or more. . 13,634 3.27% 13,076 4.93% 15,389 6.11%
-------- -------- --------
Total interest-bearing deposits. . 101,983 3.34% 105,385 4.27% 109,882 5.31%
-------- -------- --------
Total deposits . . . . . . . . . .$124,958 $126,079 $129,323
======== ======== ========
</TABLE>
The following table sets forth, by time remaining to maturity,
certificates and other time deposits of $100,000 or more (including individual
retirement accounts of $1,089,000):
December 31,
1993
--------------
(In thousands)
Under three months $ 6,602
Over three months through twelve months 7,574
Over one year through five years 402
Over five years --
--------------
Total $ 14,578
==============
Brokerage deposits were immaterial at December 31, 1993.
Short-term Borrowings
- ---------------------
Short-term borrowings consist of securities sold under agreements
to repurchase and notes payable. Amounts and interest rates related to
short-term borrowings for the last three years were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Federal funds purchased:
Outstanding at year-end. . . . . . . . . . . . . . . . . . . . . .$ -- $ 207 $ --
Average interest rate at year-end. . . . . . . . . . . . . . . . . N/A 2.9% N/A
Average outstanding at quarter-end during the year . . . . . . . .$ 9 $ 122 $ --
Weighted average interest rate . . . . . . . . . . . . . . . . . . 2.9% 2.9% N/A
Highest outstanding balance at any quarter-end . . . . . . . . . .$ -- $ 687 $ --
Securities sold under agreements to repurchase:
Outstanding at year-end. . . . . . . . . . . . . . . . . . . . . .$ 5,307 $ 7,769 $ 14,525
Average interest rate at year-end. . . . . . . . . . . . . . . . . 3.12% 3.43% 4.32%
Average outstanding at quarter-end during the year . . . . . . . .$ 7,753 $ 8,570 $ 3,696
Weighted average interest rate . . . . . . . . . . . . . . . . . . 3.06% 3.66% 5.62%
Highest outstanding balance at any quarter-end . . . . . . . . . .$ 7,673 $ 9,514 $ 14,525
Notes payable:
Outstanding at year-end. . . . . . . . . . . . . . . . . . . . . .$ 6,295 $ 6,732 $ 6,243
Average interest rate at year-end. . . . . . . . . . . . . . . . . 6.50% 6.94% 7.44%
Average outstanding at quarter-end during the year . . . . . . . .$ 6,592 $ 6,580 $ 5,740
Weighted average interest rate . . . . . . . . . . . . . . . . . . 6.50% 6.94% 7.44%
Highest outstanding balance at any quarter-end . . . . . . . . . .$ 6,592 $ 6,732 $ 6,243
</TABLE>
Asset and Liability Management
- ------------------------------
Interest Rate Risk: First Dodge manages its assets and
liabilities to control the exposure of its net interest income and
capital to risks associated with interest rate changes and to achieve
consistent growth in net interest income. Interest rate risk is
evaluated using various tools, including interest sensitivity gap and
simulation analysis.
Interest-bearing checking and savings deposits are not classified
as "rate sensitive" liabilities as per a resolution of the Board of
Directors.
The following table presents First Dodge's interest sensitivity
gap position as of December 31, 1993. This table depicts the timing of
the contractual maturity or repricing of most assets and liabilities at
this date. Fixed-rate mortgage-backed securities are included in
repricing-maturity categories based upon estimates of prepayments
provided by a third-party market information service. These estimates
may vary depending upon both the volatility and the level of market
interest rates in relationship to the coupon rates of the underlying
mortgages. Interest-bearing checking and savings deposits are included
in the under-three-month category. This table does not indicate the
effect the repricing of assets and liabilities would have on net
interest income. Also, it does not reflect interest rate exposures,
such as basis risk, prepayment risk, intra-period sensitivity, and the
effect of interest rate floors and ceilings associated with certain
financial instruments.
<TABLE>
<CAPTION>
Three Six
Under Through Through Over Not
Three Six Twelve One Rate
Months Months Months Year Sensitive Total
-------- -------- -------- -------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans and leases . . . . . . . . . .$ 47,560 $ 5,850 $ 10,423 $ 30,459 $ -- $ 94,292
Investment securities. . . . . . . . 4,146 836 4,569 23,518 26 33,095
Other earning assets . . . . . . . . 9,888 -- -- -- -- 9,888
Nonearning assets. . . . . . . . . . -- -- -- -- 14,074 14,074
-------- -------- -------- -------- --------- ---------
Total assets . . . . . . . . . . . . .$ 61,594 $ 6,686 $ 14,992 $ 53,977 $ 14,100 $151,349
======== ======== ======== ======== ========= ========
Liabilities and stockholders' equity:
Deposits . . . . . . . . . . . . . .$ 60,348 $ 12,068 $ 20,349 $ 10,790 $ 25,613 $129,168
Short-term borrowings. . . . . . . . 5,307 -- -- -- -- 5,307
Long-term debt . . . . . . . . . . . -- -- -- 6,295 -- 6,295
Other liabilities. . . . . . . . . . -- -- -- -- 2,075 2,075
Stockholders' equity . . . . . . . . -- -- -- -- 8,504 8,504
-------- -------- -------- -------- --------- --------
Total liabilities and stockholders'
equity. . . . . . . . . . . . . . . .$ 65,655 $ 12,068 $ 20,349 $ 17,085 $ 36,192 $151,349
======== ======== ======== ======== ========= ========
Repricing gap. . . . . . . . . . . . .$ (4,061) $ (5,382) $ (5,357) $ 36,892 $ (22,092) $ --
Cumulative repricing gap . . . . . . .$ (4,061) $ (9,443) $(14,800) $ 22,092 $ -- $ --
Cumulative rate-sensitive
assets/rate-sensitive liabilities . . .94 .88 .85 (*) (*)
<FN>
- ------------
(*) Not meaningful
</TABLE>
First Dodge has a negative cumulative repricing gap in the one-
year horizon. Consequently, it is more sensitive to a rising rate
environment which, if it occurred, would adversely impact the net
interest margin. Simulation modeling has demonstrated that a sudden
and large increase in rates or a dramatic narrowing in the spread
between asset yields and liability costs would result in an adverse
impact on the net interest margin; however, the adverse impact is more
moderate if interest rates increase gradually.
The repricing gap in the one year horizon is .85:1 resulting in
a negative cumulative repricing gap. Consequently, it is more
sensitive to a rising rate environment, which, if it occurred, would
adversely impact the net interest margin.
The repricing gap in the 12 month to 24 month category is 5.52:1
Liquidity: First Dodge's consolidated statements of cash flows
are presented elsewhere in this report. These statements distinguish
cash flows as operating, investing, and financing. They provide a
historical accounting of First Dodge's ability to generate cash
required to meet its customers' and creditors' demands. Certain
statement-of-condition items and ratios are indicative of First Dodge's
strong liquidity position at December 31, 1993. The loans-to-deposits
and loans-to-assets ratios averaged 73.0% and 62.3%, respectively,
during 1993. During 1993, average core deposits (demand, interest
checking, savings, and time deposits under $100,000) represented 86.6%
of total deposits and 59.5% of average assets.
At December 31, 1993, securities sold under agreements to
repurchase and other borrowings totaled $11.6 million. At that same
date, additional borrowing liquidity was also available in the form of
$20.5 million of unpledged investment securities which could secure
short-term borrowing requirements. Regular maturities and prepayments
of investment securities, particularly the mortgage-backed securities,
also generate significant liquidity. Scheduled principal reductions
and prepayments on the mortgage-backed securities approximated $.93
million during the fourth quarter of 1993.
First Dodge had commitments to extend credit at December 31,
1993, including standby letters of credit of $.4 million, unused credit
card lines of $3.8 million, and other loan commitments of $20.2
million. Some of these commitments will not be fully utilized, others
will expire without being drawn upon, and the commitments will not all
be used at the same time. Accordingly, management anticipates that
First Dodge has ample liquidity to meet these and other demands.
Capital Resources
- -----------------
At December 31, 1993, total stockholders' equity was $8.5 million
compared to $7.6 million at December 31, 1992. For 1993, total
stockholders' equity averaged $8.2 million. The prior year average
equity was $8.3 million.
Banking system regulators apply two measures of capital adequacy
to banking companies: the risk-based capital and leverage ratios. The
risk-based capital rules provide for the weighting of assets and
off-balance-sheet commitments and contingencies according to prescribed
risk categories ranging from 0 to 100%. Regulatory capital is then
divided by risk-weighted assets to determine the risk-adjusted capital
ratios. The leverage ratio supplements the risk-based capital
guidelines by placing a constraint on the degree to which a banking
company can leverage its equity capital, regardless of the balance
sheet composition. The leverage ratio is computed by dividing Tier I
capital by quarter-to-date average assets less certain intangibles.
The following table presents First Dodge's risk-based capital and
leverage ratios together with the required minimums.
<TABLE>
<CAPTION>
First
National Bank Metro Bank
------------------ ------------------
December 31, December 31,
------------------ ------------------
1993 1992 1993 1992
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Tier I capital:
Common stockholders' equity. . . . . . . . . . . . . . .$ 9,192 $ 9,095 $ 2,802 $ 2,802
Preferred stockholders equity. . . . . . . . . . . . . . -- -- 1,915 1,915
Less intangible assets . . . . . . . . . . . . . . . . . (116) (170) (1,720) (1,863)
-------- -------- -------- --------
Total Tier I capital . . . . . . . . . . . . . . . . . 9,076 8,925 2,997 2,854
Tier II capital:
Allowance for credit losses (1). . . . . . . . . . . . . 889 992 360 348
-------- -------- -------- --------
Total capital. . . . . . . . . . . . . . . . . . . . . . .$ 9,965 $ 9,917 $ 3,357 $ 3,202
======== ======== ======== ========
Risk weighted assets . . . . . . . . . . . . . . . . . . .$ 75,023 $ 66,860 $ 25,530 $ 23,353
======== ======== ======== ========
Adjusted average assets (2). . . . . . . . . . . . . . . .$107,313 $111,119 $ 38,187 $ 36,278
======== ======== ======== ========
</TABLE>
As of December 31, 1993, First Dodge's consolidated capital was $8,504,000 as
compared to $7,597,000 at December 31, 1992. First National and Metro Bank are
subject to regulatory capital guidelines as measured by a number of "risk
based capital" ratios. The following table presents those regulatory
minimums, First National's, and Metro Bank's "risk based capital" ratios.
<TABLE>
<CAPTION>
First
National Bank Metro Bank
------------------ ------------------
Regulatory December 31, December 31,
------------------ ------------------
minimums 1993 1992 1993 1992
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Risk-based capital ratios:
Tier I . . . . . . . . . . . . . . . . . . . . 4.00% 12.10% 13.35% 11.74% 12.22%
Tier II. . . . . . . . . . . . . . . . . . . . 8.00% 13.28% 14.83% 13.15% 13.71%
Leverage ratio . . . . . . . . . . . . . . . . 3.00% 8.46% 8.03% 7.85% 7.87%
<FN>
- -----------
(1) Limited to 1.50% risk weighted assets.
(2) Quarterly average assets less intangibles.
</TABLE>
As indicated in the preceding table, First Dodge's risk-based and
leverage capital ratios substantially exceed the minimums required by
banking system regulators.
The Federal Deposit Insurance Corporation adopted final
regulations under the Federal Deposit Insurance Corporation Improvement
Act, effective June 16, 1992. A bank is typically defined to be "well
capitalized" if it maintains a Tier I capital ratio of at least 6.0%,
a total risk-based capital ratio of at least 10.0% and a leverage
ratio of at least 5.0%. Generally, it is First Dodge's intention to
maintain sufficient capital in each of its bank subsidiaries to permit
them to maintain a "well capitalized" designation. The capital ratios
for First Dodge exceeded the "well capitalized" regulatory capital
requirements at December 31, 1993.
Recently Issued Accounting Standards
- ------------------------------------
In May 1993, the Financial Accounting Standards Board issued
Financial Accounting Standard ("FAS") No. 114 which could have an
effect on First Dodge in 1994 and after. FAS No. 114 addresses the
accounting by creditors for impairment of certain loans. It is
applicable to all creditors and to all loans, uncollateralized as well
as collateralized, except large groups of smaller-balance homogeneous
loans that are collectively evaluated for impairment, loans that are
measured at fair value or at the lower of cost or fair value, leases,
and debt securities. It applies to all loans that are restructured in
a troubled debt restructuring involving a modification of terms. The
Statement requires that, when evaluating the need for an allowance for
credit losses on impaired loans that are within the scope of this
Statement, the loss accrual be measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market
price or the fair value of the collateral if the loan is collateral-
dependent. This Statement is effective for fiscal years beginning
after December 15, 1994. First Dodge has not completed the analyses
required to estimate the impact of FAS 114; however, First Dodge does
not believe the adoption of the new rules will have an adverse effect
on its financial condition.
Effects of Inflation and Changing Prices
- ----------------------------------------
Virtually all assets and liabilities of a banking organization
are monetary in nature. As such, they represent obligations to pay or
receive fixed and determinable amounts of money which are not affected
by future changes in prices. Changes in interest rates are the
greatest determinant of bank earnings. However, interest rates do not
necessarily move in the same direction or with the same magnitude as
prices of other goods and services. A financial institution can
respond to changes in interest rates by matching the maturities and
costs of its liabilities against its interest earning assets. How well
the institution copes with changing interest rates may then be
determined by examining its net yield on earning assets and analyzing
its asset and liability structure. Accordingly, reference to the
various supplementary schedules shown elsewhere in this report will
assist in the understanding of how First Dodge is positioned to react
to changing interest rates and inflationary trends.
<TABLE>
<CAPTION>
Quarterly Financial Data (Unaudited)
- ------------------------------------
1993
---------------------------------------
4th 3rd 2nd 1st
-------- -------- -------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Summary Income Statement Information:
Interest income. . . . . . . . . . . . . . . . . . . . .$ 2,705 $ 2,640 $ 2,646 $ 2,611
Interest expense . . . . . . . . . . . . . . . . . . . . 1,008 1,023 1,021 1,074
-------- -------- -------- --------
Net interest income. . . . . . . . . . . . . . . . . . . 1,697 1,617 1,625 1,537
Provision (benefit) for credit losses. . . . . . . . . . 98 (220) 10 20
-------- -------- -------- --------
Net interest income after provision for credit losses. . 1,599 1,837 1,615 1,517
Investment securities gains. . . . . . . . . . . . . . . 93 -- 75 6
Other noninterest income . . . . . . . . . . . . . . . . 379 334 406 339
Noninterest expense. . . . . . . . . . . . . . . . . . . (1,300) (1,606) (1,387) (1,358)
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . . . . 771 565 709 504
Income tax expense . . . . . . . . . . . . . . . . . . . 264 178 216 164
-------- -------- --------- --------
Net income before minority interest and cumulative
effect of a change in accounting principle. . . . . . . 507 387 493 340
Minority interest in income of subsidiaries. . . . . . . 55 45 53 46
-------- -------- -------- --------
Income before cumulative effect of a change in
accounting principle. . . . . . . . . . . . . . . . . . 452 342 440 294
Cumulative effect of a change in accounting principle. . -- -- -- 73
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . .$ 452 $ 342 $ 440 $ 367
======== ======== ======== ========
Net income applicable to common stock. . . . . . . . .$ 452 $ 342 $ 440 $ 367
======== ======== ======== ========
Per Common Share Data:
Earnings per common share:
Income before cumulative effect. . . . . . . . . . . .$ 86.02 $ 65.09 $ 83.74 $ 55.95
Cumulative effect of a change in accounting principle. -- -- -- 13.89
-------- -------- -------- --------
Net income per share . . . . . . . . . . . . . . . . .$ 86.02 $ 65.09 $ 83.74 $ 69.84
======== ======== ======== ========
Common dividends . . . . . . . . . . . . . . . . . . .$ 132.08 $ -- $ -- $ --
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1992
---------------------------------------
4th 3rd 2nd 1st
-------- -------- -------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Summary Income Statement Information:
Interest income. . . . . . . . . . . . . . . . . . . . .$ 2,828 $ 2,911 $ 2,980 $ 3,242
Interest expense . . . . . . . . . . . . . . . . . . . . 1,121 1,238 1,378 1,527
-------- -------- -------- --------
Net interest income. . . . . . . . . . . . . . . . . . . 1,707 1,673 1,602 1,715
Provision (benefit) for credit losses. . . . . . . . . . 95 55 60 (195)
-------- -------- -------- --------
Net interest income after provision for credit losses. . 1,612 1,618 1,542 1,910
Investment securities gains. . . . . . . . . . . . . . . 54 237 93 --
Other noninterest income . . . . . . . . . . . . . . . . 320 286 340 312
Noninterest expense. . . . . . . . . . . . . . . . . . . (1,391) (1,380) (1,321) (1,256)
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . . . . 595 761 654 966
Income tax expense . . . . . . . . . . . . . . . . . . . 261 251 128 366
-------- -------- -------- --------
Net income before minority interest
and extraordinary item . . . . . . . . . . . . . . . . 334 510 526 600
Minority interest in income of subsidiaries. . . . . . . 42 49 42 73
-------- -------- -------- --------
Income before extraordinary item . . . . . . . . . . . . 292 461 484 527
Extraordinary item . . . . . . . . . . . . . . . . . . . -- -- -- 130
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . .$ 292 $ 461 $ 484 $ 657
======== ======== ======== ========
Net income applicable to common stock. . . . . . . . .$ 292 $ 461 $ 484 $ 657
======== ======== ======== ========
Per Common Share Data:
Net income per share . . . . . . . . . . . . . . . . .$ 55.57 $ 87.73 $ 92.11 $ 125.04
======== ======== ======== ========
Common dividends . . . . . . . . . . . . . . . . . . .$ 142.73 $ -- $ -- $ --
======== ======== ======== ========
</TABLE>
METRO BANCSHARES, INC.
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Metro Bancshares, Inc.
Broken Arrow, Oklahoma
We have audited the accompanying consolidated statement of condition of
Metro Bancshares, Inc. (an Oklahoma corporation) as of December 31,
1993, and the related consolidated statement of income, changes in
stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to in
the first paragraph present fairly, in all material respects, the
financial position of Metro Bancshares, Inc. as of December 31, 1993,
and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
As discussed in Note 14 to the consolidated financial statements, on
February 25, 1994, the Bank's parent, First Dodge City Bancshares,
Inc., entered into an Agreement and Plan of Reorganization with Fourth
Financial Corporation.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for deferred income taxes
effective with the beginning of the year ended December 31, 1993.
We have compiled the accompanying consolidated statement of condition
of Metro Bancshares, Inc. (an Oklahoma corporation) as of December 31,
1992, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended December 31,
1992 and 1991, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
Board of Directors
Metro Bancshares, Inc.
Broken Arrow, Oklahoma
Page 2
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We
have not audited or reviewed the accompanying consolidated financial
statements and, accordingly, do not express an opinion or any other
form of assurance on them.
/s/Smoll, Banning and Neier, Chtd.
January 21, 1994, except for Note 14,
as to which the date is February 25,
1994, and except for the compiled
financial statements referred to in
this report, as to which the date is
March 30, 1994
METRO BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CONDITION
December 31,
-----------------------
1993 1992
-------- ---------
Audited Unaudited
-------- ---------
(In thousands)
ASSETS
------
Cash and cash equivalents:
Cash and due from depository institutions $ 857 $ 1,009
Federal funds sold 4,295
-------- ---------
Total cash and cash equivalents 5,152 1,009
-------- ---------
Interest-bearing deposits in depository
institutions
Investment securities (market value of
$10,965 in 1993 and $7,686 in 1992) 10,829 7,686
-------- ---------
Loans 26,026 24,400
Less-allowance for loan losses 360 348
-------- ---------
Net loans 25,666 24,052
-------- ---------
Bank premises and equipment 1,341 1,395
-------- ---------
Other real estate owned 35 345
-------- ---------
Goodwill 1,211 1,251
-------- ---------
Other assets 1,072 1,145
-------- ---------
Total assets $ 45,306 $ 36,883
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Demand $ 5,428 $ 5,087
NOW and money market accounts 8,381 9,176
Savings 1,522 1,224
Time, $100,000 and over 5,741 3,226
Other time 19,157 13,040
-------- ---------
Total deposits 40,229 31,753
-------- ---------
Federal funds purchased 207
-------- ---------
Borrowed funds 44 44
-------- ---------
Other liabilities 316 162
-------- ---------
Stockholders' equity:
Preferred stock; $1.00 par value; 3,000,000
shares authorized; 1,915,333 issued
and outstanding 1,915 1,915
Common stock; $.10 par value; 1,000,000
shares authorized; 905,000 issued and
904,795 outstanding 91 91
Surplus 5,493 5,493
Retained earnings ( 2,782) ( 2,782)
-------- ---------
Total stockholders' equity 4,717 4,717
-------- ---------
Commitments and contingencies
Total liabilities and stockholders' equity $ 45,306 $ 36,883
======== =========
See Accompanying Notes to Consolidated Financial Statements
METRO BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31,
----------------------------
1993 1992 1991
-------- ----------------
Audited Unaudited
-------- ------------------
(In thousands, except
per share amounts)
Interest income:
Interest and fees on loans $ 2,732 $ 3,078 $ 2,292
Interest on Federal funds sold 65 53 234
Interest from depository institutions 2 14
Interest on investment securities:
U.S. Treasury and government agencies 265 431 1
States and political subdivisions 144 42 194
-------- ----------------
Total interest income 3,206 3,606 2,735
-------- ----------------
Less interest expense on:
Deposits 1,142 1,351 1,476
Securities sold under agreements
to repurchase 4
Borrowed funds 4 4 4
-------- ----------------
Total interest expense 1,146 1,359 1,480
-------- ----------------
Net interest income 2,060 2,247 1,255
Provision for loan losses 30 160 141
-------- ----------------
Net interest income after
provision for loan losses 2,030 2,087 1,114
Non-interest income:
Service charges on deposit accounts 237 261 275
Net investment securities gains 6 203
Other 85 84 218
-------- ----------------
Net interest and non-interest income 2,358 2,635 1,607
-------- ----------------
Non-interest expenses:
Salaries and employee benefits 761 721 642
Net occupancy expense 217 247 266
Other operating expenses 650 793 598
-------- ----------------
Total non-interest expenses 1,628 1,761 1,506
-------- ----------------
Income before income taxes 730 874 101
Income taxes (benefit) 220 326 ( 36)
-------- ----------------
Income before extraordinary item 510 548 137
Extraordinary item:
Income tax benefit from net
operating loss carryforward 130
-------- ----------------
Net income 510 678 137
Dividends issued on preferred stock 510 350
-------- ----------------
Net income applicable to common stock $ -0- $ 328 $ 137
======== ================
Primary earnings per common share:
Income applicable to common stock
before extraordinary item $ - 0- $ .22 $ .15
Extraordinary item $ -0- $ .14 $ -0-
-------- ----------------
Net income applicable to common stock $ -0- $ .36 $ .15
======== ================
See Accompanying Notes to Consolidated Financial Statements
METRO BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Preferred Common Retained
stock stock Surplus Earnings Total
---------- ------- -------- --------- -------
(In thousands)
Balance (Unaudited),
December 31, 1990 $ 133 $ 91 $ 5,482 $( 3,247) $ 2,459
Net income 137 137
Capital injection 4 4
Issuance of preferred
stock 1,782 1,782
------- ------- --------- -------- --------
Balance (Unaudited),
December 31, 1991 1,915 91 5,486 ( 3,110) 4,382
Net income 678 678
Capital injection 7 7
Dividends paid ( 350) ( 350)
------- ------- -------- -------- --------
Balance (Unaudited),
December 31, 1992 1,915 91 5,493 ( 2,782) 4,717
Net income 510 510
Dividends paid ( 510) ( 510)
------ -------- ------- -------- --------
Balance (Audited),
December 31, 1993 $ 1,915 $ 91 $ 5,493 $( 2,782) $ 4,717
======= ======= ======= ======== =======
See Accompanying Notes to Consolidated Financial Statements
METRO BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
-----------------------------
1993 1992 1991
-------- --------- -------
Audited Unaudited
-------- ------------------
(In thousands)
Increase (decrease) in cash and
cash equivalents:
Cash flows from operating activities:
Net income $ 510 $ 678 $ 137
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 133 112 114
Loss on sale of assets 4 6 1
Provision for loan losses 30 160 141
Loss on sale and write-down of
other real estate owned 2 92 30
Deferred income taxes 46 73
Net investment securities gains ( 6) ( 203)
Discount accretion on investment
securities ( 2) ( 2) ( 1)
Premium amortization on
investment securities 36 64 11
Amortization of core deposit
intangible 103 95 43
Decrease (increase) in receivables ( 57) ( 11) 58
Decrease (increase) in interest
receivable 6 102 ( 287)
(Decrease) increase in interest
payable 33 ( 19) 30
(Decrease) increase in accrued
income taxes 79 22 ( 32)
Other, net 25 11 ( 19)
-------- -------- --------
Net cash provided by operating activities 942 1,180 226
-------- -------- --------
Cash flows from investing activities:
Net decrease (increase) in interest-
bearing deposits in depository
institutions 198 ( 198)
Purchases of investment securities ( 6,082) (10,533) ( 6,782)
Proceeds from sales and maturities
of investment securities 2,911 9,860 500
Excess of cost over net liabilities
assumed of acquired Savings and Loan
institution ( 750)
Net increase in loans ( 1,530) ( 114) (11,122)
Additions to bank premises and
equipment ( 25) ( 784) ( 85)
Proceeds from sale of bank premises
and equipment 1 29 1
Additions to other assets and other
real estate owned ( 100) ( 77) ( 250)
Proceeds from sale of other assets
and other real estate owned 267 182 361
Investment in subsidiary 7 4
-------- -------- --------
Net cash used in investing activities ( 4,558) ( 1,232) (18,321)
-------- --------- -------
METRO BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED
Year ended December 31,
----------------------------
1993 1992 1991
-------- -------- --------
Audited Unaudited
-------- ------------------
(In thousands)
Cash flows from financing activities:
Net increase (decrease) in demand
and savings deposits ( 156) 559 3,889
Net increase (decrease) in
time deposits 8,632 ( 3,025) 13,416
Net increase (decrease) in
Federal funds purchased ( 207) 207
Proceeds from sale of preferred
stock 1,782
Dividends paid ( 510) ( 350)
-------- --------- -------
Net cash provided by (used in)
financing activities 7,759 ( 2,609) 19,087
-------- --------- -------
Increase (decrease) in cash
and cash equivalents 4,143 ( 2,661) 992
Cash and cash equivalents, beginning
of year 1,009 3,670 2,678
-------- --------- -------
Cash and cash equivalents, end of year $ 5,152 $ 1,009 $ 3,670
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,113 $ 1,378 $ 1,450
======== ======== ========
Income taxes $ 95 $ 101 $ ( 4)
======== ======== ========
See Accompanying Notes to Consolidated Financial Statements
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
1.Summary of significant accounting policies
------------------------------------------
General
-------
The accounting and reporting policies of the consolidated group
conform to generally accepted accounting principles and to general
practice within the banking industry for the year ended December
31, 1993. In accordance with the usual practice of banks, assets
and liabilities of individual trust funds are not included in these
consolidated financial statements.
Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of Metro
Bancshares, Inc. and its wholly owned subsidiary Metro Bank of
Broken Arrow. All significant intercompany transactions and
accounts have been eliminated in consolidation.
Cash and due from banks
-----------------------
Cash and due from banks includes all non-interest bearing deposits
with other banks. At December 31, 1993, the Federal Reserve
required the Company to maintain an average balance of
approximately $92,000.
Investment securities
---------------------
Investment securities are those securities which the Company has
the ability and intent to hold to maturity. These securities are
stated at cost adjusted for amortization of premiums and accretion
of discounts, which are recognized as adjustments to interest
income. Gains or losses on the sale of investment securities are
recognized on the completed transaction basis.
Effective for the first quarter of 1994, the Company's subsidiary
bank adopted a policy of classifying certain United States Treasury
securities and obligations of United States government corporations
and agencies as "available for sale" in accordance with the
guidelines of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
Loans
-----
Loans are carried at principal amounts outstanding less unearned
discount. Unearned discount is being recognized over the life of
the respective loans as a credit to interest income. Loan losses
are charged and recoveries are credited to the allowance for loan
losses. The allowance for loan losses is based on management's
judgement as to potential losses, after consideration of such
factors as recent loan losses and current economic conditions.
Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and
collection efforts, that the borrowers' financial condition is such
that collection of interest is doubtful.
The Company's subsidiary bank grants agribusiness, commercial, real
estate and personal loans to customers in the Bank's respective
market area.
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
1.Summary of significant accounting policies-continued
-----------------------------------------------------
Bank premises and equipment
---------------------------
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets. Gains and losses on
dispositions are credited or charged to income. Maintenance and
repairs are charged to expense as incurred. Bank premises and
equipment are being depreciated over the following estimated useful
lives:
Category Years
-------- -----
Building premises 15-40
Furniture, fixtures and equipment 3-10
Other real estate owned
-----------------------
Other real estate owned consists of properties acquired through
foreclosure or loan settlement. Individual properties are stated
at the lower of fair market value or the carrying amount of the
loan at the time of acquisition. Gains or losses on dispositions
are credited or charged to income.
Goodwill
--------
Goodwill represents the excess of the cost of acquired companies
over the fair market value of their net assets at the date of
acquisition. Amortization expense is computed on the straight-line
method over 40 years and amounted to $41,250 for 1993, 1992 and
1991.
Income taxes
------------
The Bank is a member of a group which files a consolidated federal
income tax return. Income taxes are allocated to members of the
group based on their respective incomes.
Income taxes are provided for the tax effects of transactions
reported on the financial statements and consist of income taxes
currently due plus deferred income taxes. The deferred income
taxes represent the future income tax return consequences of
temporary differences in the recognition of income and expense for
tax and financial statement purposes.
Deferred taxes are computed as prescribed in Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
SFAS No. 109 requires deferred tax balances to be adjusted to
reflect the tax rates in effect when those amounts are expected to
become payable or refundable. SFAS No. 109 is effective for fiscal
years beginning after December 15, 1992 and the Bank adopted SFAS
No. 109 in the first quarter of 1993.
Off-balance-sheet financial instruments
---------------------------------------
In the ordinary course of business the Company has entered into
off-balance-sheet financial instruments consisting of commitments
to extend credit, commitments under credit card arrangements,
commercial letters of credit and standby letters of credit. Such
financial instruments are recorded in the financial statements when
they are payable.
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
1.Summary of significant accounting principles-continued
------------------------------------------------------
Statements of cash flows
------------------------
For purposes of the statements of cash flows, the Company has
defined cash and cash equivalents as those amounts included in the
consolidated statements of condition captions "Cash and due from
depository institutions" and "Federal funds sold".
2.Investment securities
---------------------
Investment securities with an amortized cost of $1,113,186 were
pledged to secure U.S. Government deposits, other public funds and
trust deposits at December 31, 1993.
The amortized cost and approximate market value of investment
securities follows:
December 31, 1993 (Audited):
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
-------------------------------------------
(In thousands)
U.S. Treasury
securities and
obligations of
U.S. government
corporations
and agencies $ 7,817 $ 21 $( 6) $ 7,832
Obligations of
states and
political
subdivisions 2,986 121 3,107
Other 26 26
--------------------------------------------
Total $ 10,829 $ 142 $( 6) $ 10,965
--------------------------------------------
December 31, 1992 (Unaudited):
U.S. Treasury
securities and
obligations of
U.S. government
corporations
and agencies $ 4,845 $ 63 $ $ 4,908
Obligations of
states and
political
subdivisions 2,815 1 ( 64) 2,752
Other 26 26
--------------------------------------------
Total $ 7,686 $ 64 $( 64) $ 7,686
--------------------------------------------
The amortized cost and estimated market value of investment
securities at December 31, 1993, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
2.Investment securities-continued
-------------------------------
Estimated
Amortized market
cost value
---------------------
(In thousands)
Due in one year or less $ 2,667 $ 2,686
Due after one year through five years 5,325 5,321
Due after five years through ten years 2,811 2,932
Due after ten years 26 26
----------------------
Total $ 10,829 $ 10,965
======================
Proceeds from sales and maturities of investment securities were
$2,910,797, $9,860,312 and $500,000, in 1993, 1992 and 1991,
respectively. Gross gains of $6,310 and $202,582 were realized on
those sales in 1993 and 1992, respectively. There were no gross
gains or losses realized on maturities in 1991.
3.Loans and allowance for loan losses
-----------------------------------
A distribution of loans follows:
December 31, 1993 December 31, 1992
----------------------- ---------------------
Amount Percent Amount Percent
---------- ---------- ---------- -----------
Audited Unaudited
----------------------- ---------------------
(Dollars in thousands)
Loans to farmers $ 84 .3% $ 230 .9%
Commercial and
industrial
loans 6,624 25.5 6,190 25.4
Real estate
loans 13,410 51.5 11,604 47.6
Loans to
individuals 5,871 22.6 6,309 25.8
All other loans 37 .1 67 .3
---------- ---------- ----------- ----------
Total loans $ 26,026 100.0% $ 24,400 100.0%
=========== =========== ========== ==========
The unaccreted balance of discounts on purchased loans amounted to
$1,154,036 and $1,433,129 at December 31, 1993 and 1992,
respectively. Accretion included in interest income amounted to
approximately $270,000 for 1993, $440,000 for 1992, and $180,000
for 1991.
Loans on which the accrual of interest has been discounted or
reduced amounted to approximately $194,000 and $83,000 at
December 31, 1993 and 1992, respectively. If interest on those
loans had been accrued, such income would have approximated $20,536
for 1993, $13,281 for 1992, and $46,877 for 1991.
At December 31, 1993, fixed rate loans amounted to approximately
$16 million and variable rate loans amounted to approximately $10
million.
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
3.Loans and allowance for loan losses-continued
---------------------------------------------
Changes in the allowance for loan losses were as follows:
1993 1992 1991
----------- --------- ----------
Audited Unaudited
----------- ---------------------
(In thousands)
Balance at January 1 $ 348 $ 314 $ 290
Net provision charged
to income 30 160 141
Recoveries 16 25 11
---------- ----------- ---------
394 499 442
Less-loans charged off 34 151 128
---------- ----------- ---------
Balance at December 31 $ 360 $ 348 $ 314
========== =========== =========
4.Bank premises and equipment
---------------------------
A summary of bank premises and equipment follows:
1993 1992
----------- -----------
Audited Unaudited
----------- -----------
(In thousands)
Land, buildings and
components $ 1,352 $ 1,376
Furniture, fixtures and
equipment 569 683
----------------------
1,921 2,059
Less-accumulated depreciation 580 664
----------------------
Net bank premises and
equipment $ 1,341 $ 1,395
=========== ==========
Depreciation expense amounted to $93,607 in 1993, $69,726 in 1992, and
$73,015 in 1991.
5.Core deposit intangible
-----------------------
The amortized balance of core deposit intangible of $509,256 and
$611,773 at December 31, 1993 and 1992, respectively, is included
in other assets and represents the excess of liabilities assumed
over assets acquired from Broken Arrow Savings, F.A. in 1991. The
intangible is being amortized over a period of eight years based on
a study of the deposits acquired. Amortization expense amounted to
$102,517 in 1993, $94,951 and 1992 and $43,276 in 1991.
6.Borrowed funds
--------------
A summary of borrowed funds follows:
1993 1992
---------- ------------
Audited Unaudited
---------- ------------
(In thousands)
8% subordinated debenture to
Louie L. Kirk, Jr., on
4,000 shares of Metro
Bancshares, Inc. stock,
due on April 28, 1997. $ 44 $ 44
----------- -----------
Total borrowed funds $ 44 $ 44
=========== ===========
In general, the debentures are subordinated to the Company's senior
indebtedness and any renewal, extension or refinancing of such indebtedness.
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
6.Borrowed funds-continued
------------------------
Borrowed funds are scheduled to mature in each of the years subsequent to
December 31, 1993, as follows:
Year Audited
---- ------------
(In thousands)
1994 $
1995
1996
1997 44
-----------
Total $ 44
===========
7.Income taxes
------------
The provision for income taxes consisted of the following:
1993 1992 1991
----------- ------------ ----------
Liability
Method Deferred method
----------- ------------------------
Audited Unaudited
----------- ------------------------
(In thousands)
Current income tax expense:
Federal $ 174 $ 123 $( 36)
State
----------- ---------- -----------
174 123 ( 36)
Deferred income
tax expense 46 73
----------- ---------- -----------
Total $ 220 $ 196 $( 36)
=========== ========== ==========
The provision for federal income taxes is less than that computed by applying
the federal statutory rate of 34% in 1993, 1992 and 1991, as indicated
in the following analysis:
1993 1992 1991
------------- ---------- ----------
Audited Unaudited
------------- ---------- ----------
(In thousands)
Tax based on statutory rate $ 248 $ 297 $ 34
State income tax, net of
federal benefit
Tax effect of permanent
differences ( 28) 31 ( 68)
Net operating loss
carryforward ( 130)
Other, net ( 2) ( 2)
------------- ----------- ---------
Total $ 220 $ 196 $ ( 36)
=========== ========== ==========
The components of deferred income taxes were principally related to
the allowance for loan losses, depreciation, and write-downs of
other real estate owned.
8.Earnings per common share
-------------------------
Earnings per common share are based on the number of common shares
outstanding of 905,000 in 1993, 1992 and 1991.
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
9.Profit sharing plan
-------------------
MBI's subsidiary bank established a 401(k) and a noncontributory
profit sharing plan covering substantially all employees on January
1, 1992. Employees must meet certain criteria to become eligible
to participate in the 401(k) plan. They must complete 1,000 hours
of service during twelve consecutive months measured from the first
day of employment and have attained the age of 21. Upon meeting
these requirements, the employee may enter the plan on the next
entry date (January 1 or July 1). The plan also contains a
deferred-salary arrangement under Internal Revenue Code Section
401(k) which is partially matched by employer contributions.
Discretionary contributions are approved by the Board of Directors.
Qualified Nonelective Contributions are made in order to satisfy
certain plan antidiscrimination requirements. Employer
contributions were $12,589 in 1993 and $11,332 in 1992.
10.Commitments and contingencies
-----------------------------
In the normal course of business, the Company makes various
commitments and incurs certain contingent liabilities that are not
presented in the accompanying consolidated financial statements.
The commitments and contingent liabilities include unused
commitments on lines of credit and commitments to extend standby
letters of credit. Since some of these commitments are expected to
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. At December
31, 1993, unused commitments on lines of credit and commitments
under standby letters of credit were approximately $2,047,000 and
$-0-, respectively. The Bank does not anticipate any material
losses as a result of the commitments and contingent liabilities.
11.Related parties
---------------
In the normal course of business, the Bank makes loans and enters
into other transactions with its officers and directors and their
affiliates. The Bank's policy relative to officer and director
related loans is to provide terms and conditions identical to terms
and conditions prevailing at the same time for comparable
transactions with other customers. An analysis of aggregate loan
activity with this group, follows:
1993
-----------
Audited
-----------
(In thousands)
Loans outstanding at January 1 $ 18
New loans 49
Repayments ( 5)
-----------
Loans outstanding at December 31 $ 62
===========
The Bank held demand and other deposits for related parties of
approximately $277,000 and $78,000, as of December 31, 1993 and
1992, respectively.
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
12.Regulatory matters
------------------
The Bank is subject to certain restrictions set forth by various
regulatory agencies. These restrictions include, among other
things, a limitation on the amount of dividends declared and
requirements to maintain minimum amounts of capital.
13.Condensed financial information of parent corporation
-----------------------------------------------------
In the following condensed financial information of Metro
Bancshares, Inc. (parent only), investments in subsidiaries are
recorded using the equity method of accounting.
Metro Bancshares, Inc. (parent only)
Condensed statement of condition (unaudited):
--------------------------------------------
December 31,
------------------------
1993 1992
----------- -----------
(In thousands)
Assets:
Cash in subsidiary banks $ 14 $ 25
Investments in bank
subsidiaries 3,537 3,487
Other assets 67 11
Cost in excess of net
assets acquired 1,211 1,251
----------- -----------
Total assets $ 4,829 $ 4,774
=========== ==========
Liabilities and stockholders equity:
Subordinated debentures $ 44 $ 44
Other liabilities (including
amounts owed to subsidiaries
of $66 in 1993 and $11 in
1992) 68 13
------------ ----------
Total liabilities 112 57
Stockholders' equity 4,717 4,717
------------ ----------
Total liabilities and
stockholders' equity $ 4,829 $ 4,774
=========== ===========
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
13.Condensed financial information of parent corporation-continued
---------------------------------------------------------------
Condensed statements of income (unaudited):
------------------------------------------
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
(In thousands)
Dividends from subsidiaries $ 510 $ 350 $
-------- ------------ ----------
Total income 510 350
-------- ------------ ----------
Directors fees 11 11
Interest expense 4 4 4
Amortization of cost in excess
of net assets acquired 41 41 41
Other expenses 2
-------- ----------- -----------
Total expenses 56 56 47
-------- ----------- -----------
Income (loss) before
income taxes 454 294 ( 47)
Income tax benefit 5 30 2
Net income of subsidiaries in
excess of dividends received 51 354 151
-------- ----------- -----------
Net income $ 510 $ 678 $ 106
======== =========== ===========
Condensed statements of cash flows (unaudited):
----------------------------------------------
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
(In thousands)
Increase (decrease) in cash and
cash equivalents:
Cash flows from operating
activities:
Net income $ 510 $ 678 $ 106
Adjustments to reconcile
net cash provided by
operating activities:
Amortization 41 41 41
Net income of
subsidiaries in excess
of dividends received ( 51) ( 354) ( 151)
Changes in assets and
liabilities:
Other assets ( 56) ( 11) 58
Other liabilities 55 11 ( 58)
------------ ----------- ---------
Net cash provided by (used in)
operating activities 499 365 ( 4)
----------- ----------- ----------
Cash flows from investing
activities:
Investment in subsidiaries ( 1,782)
---------- ----------- ----------
Net cash used in
investment activities ( 1,782)
---------- ----------- ----------
METRO BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
13.Condensed financial information of parent corporation-continued
---------------------------------------------------------------
Condensed statements of cash flows (unaudited)-continued:
--------------------------------------------------------
Cash flows from financing
activities:
Proceeds from advances
from subsidiaries 4
Proceeds from issuance of
preferred stock 1,782
Dividends on preferred
stock ( 510) ( 350)
Other, net 8
----------- ------------ --------
Net cash provided by (used in)
financing activities ( 510) ( 342) 1,786
----------- ------------ --------
Increase (decrease) in cash
and cash equivalents ( 11) 23
Cash and cash equivalents,
beginning of year 25 2 2
----------- ----------- ---------
Cash and cash equivalents,
end of year $ 14 $ 25 $ 2
=========== ========== ==========
Cash payments for:
Interest $ 4 $ 4 $ 4
=========== ========== ==========
14.Subsequent event
----------------
On February 25, 1994, the Bank's parent, First Dodge City
Bancshares, Inc. ("Bancshares"), entered into an Agreement and Plan
of Reorganization ("Agreement") with Fourth Financial Corporation
("Fourth Financial"). The Agreement provides for the simultaneous
mergers of Bancshares, First National Bancshares of Dodge City,
Inc. ("FNB"), and Metro Bancshares, Inc. ("MBI") into Fourth
Financial, the merger of Metro Bank of Broken Arrow, Broken Arrow,
Oklahoma ("Metro Bank") into BANK IV Oklahoma, National
Association, and the merger of First National Bank and Trust, Dodge
City, Kansas ("First National") into BANK IV Kansas, National
Association. Consummation of the agreement is conditioned upon
several things, including (i) all governmental approvals being
obtained and continuing in effect, and (ii) receipt by Fourth
Financial of "affiliate agreements" from all persons identified by
it as being "affiliates" within the meaning of Securities and
Exchange Commission rules. In the agreement, all
outstanding capital stock of Bancshares would be converted into an
aggregate of 590,711 shares of Fourth Financial Common Stock
("Fourth Stock").
The shares of capital stock of MBI (other than the shares owned by
Bancshares) and all of the capital stock of First National not
owned by FNB would be converted as set out in the Agreement. For
purposes of expense and convenience, cash will be paid in lieu of
fractional shares of Fourth Stock.
The Agreement includes a provision which limits the amount of
dividends that the Bank can pay prior to the merger transaction.
REPORT OF AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed of four
independent directors. The members of the Audit Committee at December 31,
1993 were John Harding, Richard Mudge, Tom Shirley, and Bruce Switzer.
This committee held twelve meetings during the year ended December 31,
1993.
The Audit Committee has the responsibility to assist the Board of
Directors in performing its fiduciary duty to the existing and potential
stockholders of MBI and to the investment community relating to the
accounting and reporting practices and the integrity of the financial
reports of MBI. The committee recommended to the Board of Directors,
subject to stockholder approval, the selection of MBI's independent
auditors, Smoll, Banning and Neier, Chartered.
The Audit Committee has discussed with the independent auditors and
the internal auditor the overall scope and specific plans for their
respective audits, MBI's consolidated financial statements, and its
internal controls. The committee met regularly with MBI's internal
auditor and independent auditors, without management present, to discuss
the results of their audits, MBI's internal controls, and the overall
quality of its financial reporting. The committee has also reviewed the
reports of bank regulatory agencies. The committee was available to
discuss, in private, any matter desired by the internal auditor or the
independent auditors.
REPORT OF MANAGEMENT
Management is responsible for the content of the financial
statements and related financial information included in this report.
Management believes that the financial statements have been prepared in
conformity with generally accepted accounting principles appropriate in
the circumstances to reflect, in all material respects, the substances of
events and transactions that should be included. The financial statements
reflect management's judgments and estimates as to the effects of events
and transactions that are accounted for or disclosed.
Management has long recognized the importance of MBI's maintaining
and reinforcing the highest possible standards of conduct in all of its
actions, including the preparation and dissemination of statements fairly
presenting the financial condition of MBI. In this regard, it has
developed a system of internal accounting controls which plays an
important role in assisting management in fulfilling its responsibilities
in preparing MBI's financial statements. MBI's system of internal
accounting controls is designed to provide reasonable assurance that
assets are safeguarded and that transactions are executed in accordance
with management's policies. This system is augmented by a code of ethics
which is monitored and enforced, by written policies and procedures, and
by an independent internal audit staff which reports to the Audit
Committee of the Board of Directors. A description of the Audit
Committee's responsibilities and activities is presented in the
accompanying report of the Audit Committee. Management recognized that
because of cost-benefit considerations and other inherent limitations on
the effectiveness of any internal accounting control system, some errors
and other irregularities may occur. However, management believes that
MBI's internal accounting control system provides reasonable assurance
that errors or irregularities that could be material to the financial
statements are prevented or would be detected on a timely basis and
corrected in the normal course of business.
The independent auditors are engaged, in their annual audit
function, to express an opinion on MBI's financial statements, which
opinion is to be based on their performance of an audit in accordance with
generally accepted auditing standards.
<TABLE>
<CAPTION>
METRO BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
-----------------------------------------
1993 1992 1991(1) 1990 1989
-----------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Summary income statement information:
Interest income . . . . . $ 3,206 $ 3,606 $ 2,735 $ 1,588 $ 1,665
Interest expense. . . . . 1,146 1,359 1,480 886 1,018
Net interest income . . . 2,060 2,247 1,255 702 647
Net interest income (tax equivalent) (2) 2,134 2,269 1,255 702 647
Provision for credit losses 30 160 141 234 569
Noninterest income. . . . 328 548 493 342 338
Noninterest expense . . . 1,628 1,761 1,506 1,462 1,423
Income (loss) before extraordinary item 510 548 137 (407) (769)
Extraordinary item. . . . -- 130 -- -- --
Net income (loss) . . . . 510 678 137 (407) (769)
Net income (loss) applicable to
common stock . . . . . . -- 328 137 (407) (769)
Per common share data:
Earnings per common share:
Income before extraordinary item $ -- $ .22 $ .15 $ (.45) $ (.85)
Extraordinary item . . . -- .14 -- -- --
Primary. . . . . . . . . -- .36 .15 (.45) (.85)
Cash dividend. . . . . . -- -- -- -- --
Book value per common share 3.10 3.10 2.73 2.57 2.52
Average common shares outstanding (000s) 905 905 905 905 905
Year-end common shares outstanding (000s) 905 905 905 905 905
Earnings performance ratios (3):
Return on assets. . . . . 1.28% 1.78% .39% (2.18)% (3.69)%
Return on total stocholders' equity 10.78 14.21 4.02 (16.02) (38.55)
Return on common stockholders' equity -- 11.48 5.74 (16.91) (41.30)
Summary statements of condition information:
Year-end assets . . . . . $45,306 $36,883 $38,721 $19,566 $19,664
Year-end loans and leases 26,026 24,400 24,457 13,467 11,580
Year-end allowance for credit losses 360 348 314 290 351
Year-end long-term debt . 44 44 44 44 44
Year-end common stockholders' equity 2,802 2,802 2,467 2,326 2,282
Year-end stockholders' equity 4,717 4,717 4,382 2,459 2,415
Average assets. . . . . . 39,907 38,141 34,733 18,709 20,833
Average loans and leases. 24,924 24,099 20,826 12,177 11,630
Average investment securities 8,126 8,171 2,924 575 1,272
Average deposits. . . . . 34,896 33,043 30,495 17,267 17,977
Average common stockholders' equity 2,817 2,857 2,387 2,407 1,862
Average stockholders' equity 4,732 4,772 3,411 2,540 1,995
Asset quality ratios:
Allowance for credit losses/year-end
loans and leases . . . . 1.38% 1.43% 1.28% 2.15% 3.03%
Nonperforming assets/year-end loans plus
other real estate and nonperforming assets .88 1.73 3.12 9.31 14.01
Allowance for credit losses/year-end
nonperforming loans. . . 185.57 419.28 129.22 44.48 33.95
Net charge-offs/average loans and leases .07 .52 .56 2.42 4.88
Capital ratios:
Stockholders' equity/assets (3) 11.86% 12.51% 9.82% 13.58% 9.58%
Leverage ratio (4). . . . 7.85 7.87 -- -- --
Tier I risk-based capital (5) 11.74 12.22 -- -- --
Total risk-based capital(5) 13.15 13.71 -- -- --
Common dividend payout ratio (6) -- -- -- -- --
<FN>
- -----------
(1)During 1991, MBI assumed core deposits totaling $18,459,000 and loans totaling $10,921,000 in the purchase of Broken
Arrow Savings, F.A.
(2)Stated on a tax-equivalent basis assuming a marginal tax rate of 34%.
(3)Based on averages of the quarter end statement of condition items.
(4)Tier I capital/average assets less certain intangibles.
(5)Tier I capital is composed of common stockholders' equity less certain intangibles plus preferred stockholders'
equity. Total capital is Tier I capital plus the allowance for credit losses (using 1993 regulatory guidelines).
Both capital amounts are divided by risk-weighted assets.
(6)Common dividend per share divided by primary earnings per share.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Performance Summary
- -------------------
Net income for 1993 was $510,000 compared to $678,000 in 1992 and
$137,000 in 1991. Primary earnings per common share were $.00, $.36,
and $.15 for 1993, 1992, and 1991, respectively, after dividends were
paid on preferred stock. For 1993, return on assets and return on
total equity were 1.28% and 10.78%, respectively. Return on assets was
1.78% for 1992 and .39% for 1991; return on total equity was 14.21% and
4.02% for the respective prior periods.
Net income for each of the last three years included
extraordinary gains and nonoperating charges. The tax benefit from a
net operating loss carryforward resulted in an addition to income of
$130,000 ($.14 per share) in 1992.
An operating charge of $103,000 ($.11 per share) was taken during
1993 to record and amortize core deposit intangibles, associated with
the purchase of the local Broken Arrow Savings, F.A. Both 1992 and
1991 financial results also reflected operating charges related to the
purchase of Broken Arrow Savings, F.A. These operating charges were
$95,000 ($.10 per share) in 1992 and $43,000 ($.05 per share) in 1991.
Interest income in 1993 decreased by $400,000 to total $3,206,000
for 1993 as compared to $3,606,000 for last year. Total average
interest-earning assets were $35.3 million for 1993 and $33.7 million
for 1992. Comparing 1993 and 1992, average loans increased $825,000,
while average investment securities decreased $45,000.
The lower provision for credit losses in 1993 reflects an
improvement in credit quality as demonstrated by a lower level of
nonperforming assets and lower net charge-offs and the strong allowance
for credit losses. At December 31, 1993, nonperforming assets were
$229,000, down from $428,000 at December 31, 1992. Net charge-offs
were $18,000 and $126,000, respectively, in 1993 and 1992. The
allowance for credit losses was $360,000 or 157.21% of nonperforming
assets at December 31, 1993, compared to $348,000 or a ratio of 81.31%
for 1992.
Noninterest income was $328,000 in 1993, a $220,000 decrease over
the 1992 noninterest income of $548,000. Service charges on deposit
accounts decreased $24,000.
Noninterest expenses decreased 7.5% to total $1,628,000 in 1993.
Net income between 1992 and 1993 decreased $168,000. The
increased net income of $541,000 reflected in a comparison of results
of operations for 1992 and 1991 can be attributed to the purchase of
Broken Arrow Savings, F.A. The $992,000 increase in net interest
income between 1992 and 1991 was due to an increased widening of
spreads between the yields on earning assets and the rates paid on
interest-bearing liabilities in addition to the purchase of Broken
Arrow Savings, F.A. The provision for credit losses amounted to
$30,000, $160,000, and $141,000 for 1993, 1992 and 1991, respectively.
Net Interest Income
- -------------------
For 1993, net interest income amounted to $2,060,000,
representing a decrease of $187,000 or 8.32% over the $2,247,000 earned
during 1992. On a fully tax-equivalent basis, net interest income
decreased 5.95% from $2,269,000 in 1992 to total $2,134,000 in 1993.
On a fully tax-equivalent basis, the yield on earning assets decreased
to 6.04% in 1993 compared to 6.73% in 1992.
Net interest income of $2,247,000 for 1992 represented an
increase of $992,000 over the $1,255,000 earned during 1991. As
interest rates declined during 1992, interest-bearing liabilities
repriced faster than interest-earning assets, causing the net yield on
earning assets, on a fully tax-equivalent basis, to widen to 6.73% in
1992 from 4.24% in 1991.
The following table summarizes the changes in net interest income
on a fully tax-equivalent basis, by major category of interest-earning
assets and interest-bearing liabilities, identifying changes related to
volumes, rates, and changes related to both volumes and rates.
Nonaccrual loans are included in the loan volumes used to calculate the
following analysis of net interest income; however, interest collected
on such loans is usually recorded as a reduction in loans outstanding
and is excluded from interest income.
1993 vs 1992
---------------------------------------------
Change
Total Attributable to
-----------------------------------
Change Volume Yield/Rate Combination
------- --------- ----------- -----------
(In thousands)
Increase (decrease) in:
Interest income:
Loans and leases(1). . . . . . $ (346) $ 105 $ (436) $ (15)
Interest-bearing deposits in
other financial institution s. (2) (2) (2) 2
Federal funds sold and securities
purchased under agreements
to resell 12 30 (12) (6)
Taxable investment securities. (166) (120) (63) 17
Tax-preferred investment
securities(1) 154 159 (1) (4)
------- -------- ----------- --------
Total interest income change. (348) 172 (514) (6)
------- -------- ----------- --------
Interest expense:
Savings and interest checking. (64) (12) (54) 2
Time deposits. . . . . . . . . (145) 78 (207) (16)
Federal funds purchased and
securities sold under
agreements to repurchase (4) (4) (4) 4
Debt . . . . . . . . . . . . . -- -- -- --
-------- -------- --------- ---------
Total interest expense change (213) 62 (265) (10)
-------- -------- --------- ----------
Decrease in net interest income (1) (135)
Decrease in taxable equivalent
adjustment (52)
--------
Net interest income change. . . $ (187)
========
<TABLE>
<CAPTION>
1992 vs 1991
---------------------------------------------
Change
Total Attributable to
-----------------------------------
Change Volume Yield/Rate Combination
-------- --------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Loans and leases(1). . . . . . $ 786 $ 360 $ 367 $ 59
Interest-bearing deposits in
other financial institutions. (12) (13) 21 (20)
Federal funds sold and securities
purchased under agreements to resell (181) (173) (30) 22
Taxable investment securities. 236 296 (24) (36)
Tax-preferred investment securities(1) 64 -- -- 64
------- --------- ----------- ---------
Total interest income change 893 470 334 89
------- --------- ----------- ---------
Interest expense:
Savings and interest checking. (100) 36 (126) (10)
Time deposits. . . . . . . . . (25) 60 (81) (4)
Federal funds purchased and securities
sold under agreements to repurchase 4 -- -- 4
Debt . . . . . . . . . . . . . -- -- -- --
------- --------- ----------- ---------
Total interest expense change (121) 96 (207) (10)
-------- --------- ----------- ---------
Increase in net interest income (1) 1,014
Decrease in taxable equivalent adjustment (22)
--------
Net interest income change. . . $ 992
========
<FN>
- ----------
(1)Computed on a tax-equivalent basis assuming a marginal tax rate of 34%.
The following table presents an analysis of average rates and yields on a fully
tax-equivalent basis for 1993, 1992 and 1991.
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
-------- -------- ------- -------- ------- ------ -------- -------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-Earning Assets:
Loans and leases(2) . . $ 24,924 $ 2,732 10.96% $ 24,099 $ 3,078 12.77% $ 20,826 $ 2,292 11.01%
Unearned income-loans . (18) N/A N/A (41) N/A N/A (49) N/A N/A
Interest-bearing deposits in other
financial institutions -- -- N/A 16 2 12.50 280 14 5.00
Federal funds sold and securities
purchased under agreements
to resell 2,277 65 2.85 1,458 53 3.64 5,604 234 4.18
Investment securities:
Taxable. . . . . . . . 5,309 265 4.99 7,361 431 5.86 2,924 195 6.67
Tax-preferred(1) . . . 2,817 218 7.74 809 64 7.91 -- -- N/A
------ ------- --------- -------- --------- --------
Total interest-earning
assets(1) . . . . . . 35,309 3,280 9.29 33,702 3,628 10.76 29,585 2,735 9.24
------- ------- --------
Cash and due from banks 1,092 1,112 1,157
Bank premises and equipment 1,431 726 712
Income receivable and other assets 632 1,007 1,894
Intangible assets, net. 1,808 1,927 1,675
Allowance for credit losses (365) (333) (290)
------ ------ ------
Total assets. . . . . . . $ 39,907 $ 38,141 $ 34,733
======= ======= ========
Liabilities And Stockholders' Equity:
Interest-Bearing Liabilities:
Interest-bearing deposits:
Interest checking. . . $ 8,427 $ 266 3.16% $ 8,883 $ 325 3.66% $ 8,238 $ 419 5.09%
Savings. . . . . . . . 1,367 40 2.93 1,253 45 3.59 1,177 51 4.33
Time under $100,000. . 15,293 660 4.32 13,132 722 5.50 12,500 720 5.76
Time over $100,000 . . 4,468 176 3.94 5,170 259 5.01 4,765 286 6.00
------- -------- --------- -------- --------- -------
Total interest-bearing deposits 29,555 1,142 3.86 28,438 1,351 4.75 26,680 1,476 5.53
Debt . . . . . . . . . . 44 4 9.09 44 4 9.09 44 4 9.09
Federal funds purchased and agreements
to repurchase . . . . . 9 -- N/A 122 4 3.28 -- -- N/A
------- -------- --------- -------- --------- -------
Total interest-bearing
liabilities 29,608 1,146 3.87 28,604 1,359 4.75 26,724 1,480 5.54
-------- ------- -------
Noninterest-bearing deposits 5,341 4,605 3,815
Accrued interest, taxes, and
other liabilities . . . 226 160 783
------- -------- --------
Total liabilities . . . 35,175 33,369 31,322
------- --------- --------
Preferred stockholders' equity 1,915 1,915 1,024
Common stockholders' equity 2,817 2,857 2,387
------- --------- -------
Total stockholders' equity 4,732 4,772 3,411
------- --------- -------
Total liabilities and
stockholders' equity . . $ 39,907 $ 38,141 $ 34,733
======= ======== ========
Net interest income . . . $ 2,134 $ 2,269 $ 1,255
======== ======== =======
Rate analysis:
Interest income/interest-earning assets 9.29% 10.76% 9.24%
Interest expense/interest-earning
assets. . . . . . . . . 3.25 4.03 5.00
------ ------ ------
Net yield on earning assets 6.04% 6.73% 4.24%
====== ====== ======
<FN>
- ----------
(1)Income and rates are stated on a tax-equivalent basis assuming a marginal tax rate of 34%.
(2)Nonaccrual loans are included in loans and leases.
</TABLE>
Provision for Credit Losses
- ---------------------------
The provisions for credit losses were $30,000, $160,000, and
$141,000 for 1993, 1992, and 1991, respectively. The lower provision
for credit losses in 1993 reflects the continued improvement in credit
quality as demonstrated by a lower level of nonperforming loans and
lower net charge-offs and the strong allowance for credit losses. Net
charge-offs for 1993 totaled $18,000 as compared to net charge-offs of
$126,000 for 1992 and net charge-offs of $117,000 for 1991.
Nonperforming loans at December 31, 1993 were $194,000, up from $83,000
at year-end 1992 and down from $243,000 at year-end 1991. The
allowance for credit losses was $360,000, $348,000, and $314,000 at
December 31, 1993, 1992, and 1991, respectively. The ratio of
allowance for credit losses to nonperforming loans decreased to 185.57%
at December 31, 1993, compared with 419.28% at December 31, 1992 and
129.22% at December 31, 1991.
Noninterest Income
- ------------------
Total noninterest income was $328,000 for 1993, representing a
decrease of $220,000 or 40.15% over the $548,000 recorded in 1992.
Included in 1993 noninterest income were $6,000 of investment
securities gains, compared to $203,000 of similar gains realized in
1992. The most significant changes in noninterest income between 1993
and 1992 occurred in securities gains.
Total noninterest income was $548,000 for 1992, as compared to
$493,000 for 1991.
The following table provides an analysis of noninterest income
segregated between fees collected in the normal course of business and
other revenues for the past three years.
<TABLE>
<CAPTION>
Percent Change
-------------
Year Ended December 31, 1992- 1991-
-------------------------
1993 1992 1991 1993 1992
------------------------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Fee income:
Service charges on deposit accounts $ 237 $ 261 $ 275 (9.2)% (5.1)%
Other. . . . . . . . . . . . 85 84 218 1.2 (61.5)
------ ----- ------ ------ ------
Total fee income . . . . . . 322 345 493 (6.7) (30.0)
------ ----- ------ ------ ------
Other revenues:
Investment securities gains . 6 203 -- (97.0) N/A
------ ----- ------ ------ ------
Total other revenues . . . . 6 203 -- (97.0) N/A
------ ----- ------ ------ ------
Total non-interest income. . . $ 328 $ 548 $ 493 (40.1) 11.2
======= ======= ====== ====== ======
Fee income/average assets . . .81% .90% 1.42%
Noninterest income/average assets .82% 1.44% 1.42%
</TABLE>
Noninterest Expense
- --------------------
Noninterest expense amounted to $1,628,000, $1,761,000, and
$1,506,000 for 1993, 1992, and 1991, respectively. Noninterest expense
for each of these years includes certain nonoperating items such as net
costs of operation of other real estate and nonperforming assets.
Operating expense decreased $42,000 or 2.5% to total $1,669,000
for 1993.
Between 1992 and 1991 operating expense increased $163,000 or
10.8%. This increase reflected a $79,000 increase in salary and
employee benefits.
The following table presents an analysis of noninterest expense
for the past three years.
Percent Change
------------
Year Ended December 31, 1992- 1991-
-----------------------
1993 1992 1991 1993 1992
------- ------- ------- ------ ------
(Dollars in thousands)
Salaries and employee benefits $ 761 $ 721 $ 642 5.5% 12.3%
Net occupancy. . . . . . . . . 217 247 266 (12.1) (7.1)
FDIC insurance . . . . . . . . 77 79 44 (2.5) 79.5
Professional fees. . . . . . . 39 38 35 2.6 8.6
Advertising and public relations 12 15 10 (20.0) 50.0
Data processing. . . . . . . . 38 33 60 15.2 (45.0)
Supplies and postage . . . . . 82 93 73 (11.8) 27.4
Amortization of core deposit intangible 103 95 43 8.4 120.9
Other. . . . . . . . . . . . . 298 348 333 (14.4) 4.5
------- ------- ------- ----- -----
Total operating expense . . . 1,627 1,669 1,506 (2.5) 10.8
Net costs of operation of other real
estate and nonperforming assets. . . . . 1 92 -- (98.9) N/A
------- ------- ------- ----- -----
Total noninterest expense . . $ 1,628 $ 1,761 $ 1,506 (7.6) 16.9
======= ======= ======= ===== =====
Noninterest expense/average assets 4.08% 4.62% 4.34%
Noninterest expense less noninterest
income/average assets. . . . . . . . . 3.26% 3.18% 2.92%
Operating expense less fee
income/average assets 3.27% 3.47% 2.92%
Operating expense/fee income plus
tax-equivalent net interest income . . 66.25% 63.85% 86.16%
Income Taxes
- ------------
Effective January 1, 1993, MBI changed its method of accounting
for income taxes from the deferred method to the liability method
required by Financial Accounting Standard ("FAS") No. 109, "Accounting
for Income Taxes". As permitted under the new rules, prior years'
financial statements have not been restated. The cumulative effect of
adopting FAS No. 109 as of January 1, 1993, was $.00
Income tax expense amounted to $220,000, $196,000, and $(36),000
for 1993, 1992, and 1991, respectively. Included in the 1992 income
tax expense of $196,000 is $130,000 benefit from carryforward of net
operating losses. The tax on 1992 book income before the tax benefit
was $326,000.
Statements of Condition
- -----------------------
Total assets amounted to $45.3 million, $36.9 million, and $38.7
million at December 31, 1993, 1992 and 1991, respectively.
Loans
- -----
Period-end loans increased $1.6 million or 6.7% to total $26.0
million at December 31, 1993. Increases were realized in various
commercial and real estate categories. The consumer portfolio declined
$438,000 or 6.9%.
Real estate loans increased $1.8 millon in 1993 which represents
a 15.56% increase and reflects a strong economy in the marketplace.
Commercial loans increased $434,000 in 1992 which is a 7.0% increase
over 1992.
Between December 31, 1991 and 1992 total loans decreased $57,000
representing .2% and loans increased $11.0 million representing 81.6%
between 1990 and 1991 due to the purchase of Broken Arrow Savings, F.A.
Total loans increased by $1.9 million or 16.3% from December 31, 1989
to 1990.
The following table shows the composition of loans and leases for
the past five years.
December 31,
------------------------------------------
1993 1992 1991 1990 1989
-------- ------- -------- -------- -------
(In thousands)
Commercial and industrial. . $ 6,624 $ 6,190 $ 6,420 $ 5,806 $ 6,706
Real estate, less unearned discount:
Construction. . . . . . . . 3,356 2,470 1,244 297 649
Secured by 1-4 family residences 8,870 8,817 10,028 2,548 2,381
Permanent commercial real
estate and other 1,184 317 403 288 298
Loans to individuals . . . . 5,871 6,309 5,963 3,340 1,024
Agriculture. . . . . . . . . 84 230 293 1,188 522
Other. . . . . . . . . . . . 37 67 106 -- --
------- ------- -------- -------- --------
Total loans and leases. . $ 26,026 $24,400 $24,457 $13,467 $11,580
======= ======= ======= ======= =======
Commercial and Industrial: MBI's commercial and industrial loans
generally are made to middle market and small businesses. There are no
highly leveraged transactions.
Real Estate: Most of the construction loans are for 1-4 family
residential construction and development.
The 1-4 family residence portfolio consists of loans secured by
residences located primarily in Broken Arrow and Coweta and is
principally permanent first mortgage loans with the remainder
consisting of home equity loans.
Permanent commercial real estate loans include loans in MBI's
market for small owner occupied office buildings/parks; small
manufacturing/machine shop buildings; and loans for purposes other than
funding the acquisition of the collateral properties and in which cash
flows from the properties are not the principal source of repayment.
Maturity Distribution and Interest Sensitivity of Loans
- -------------------------------------------------------
The maturity distribution of loans outstanding as of December 31,
1993 (excluding consumer, credit card, educational, and lease
financing) by type and sensitivity to changes in interest rates are
shown below. the current portion as well as the long-term portion of
the loan is included in the maturity group applying to the loan.
Remaining Maturity
----------------------------------
Over One
Year Over
One Year Through Five
or Less Five Years Total
---------------------------------
(In thousands)
Loans with fixed interest rates:
Commercial and industrial . . . . $ 4,340 $ 1,767 $ 136 $ 6,243
Real estate . . . . . . . . . . . 666 1,447 1,599 3,712
Agriculture . . . . . . . . . . . -- -- -- --
Other . . . . . . . . . . . . . . 2,735 3,754 183 6,672
------- -------- -------- ---------
Total loans with fixed
interest rates $ 7,741 $ 6,968 $ 1,918 $ 16,627
======== ======== ======== ========
Repricing Frequency
---------------------------------------
Less Freq Every
Than Five Years
One Year Every Or More
or Less Five Freq Total
-------- -------- -------- ---------
(In thousands)
Loans with floating interest rates:
Commercial and industrial . . . . $ 606 $ 154 $ 111 $ 871
Real estate . . . . . . . . . . . 4,702 90 143 4,935
Agriculture . . . . . . . . . . . -- -- -- --
Other . . . . . . . . . . . . . . 4,465 11 73 4,549
-------- -------- -------- --------
Total loans with floating
interest rates $ 9,773 $ 255 $ 327 $ 10,355
======== ======== ======== ========
Real estate loans include construction, permanent commercial and
other real estate.
Nonperforming Assets
- --------------------
Nonperforming assets consist of nonaccrual loans, troubled debt
restructurings, and other real estate and nonperforming assets. A loan
is placed on nonaccrual status when principal or interest is due and
has remained unpaid for 90 days or more unless the loan is both well
secured and in the process of collection. A currently performing loan
also may be placed on nonaccrual status when there is reasonable doubt
as to the ability of the borrower to continue to pay principal or
interest. Nonaccrual loans at December 31, 1993 included $194,000 of
these "performing/nonperforming" loans. Other real estate and
nonperforming assets include assets acquired from loan settlements and
foreclosures.
During 1993, banking regulators issued guidance confirming that
the loss recognition on collateral dependent loans should be based on
the fair value of the collateral, but that such loans need not be
reported as "Other real estate" unless possession of the underlying
collateral has been obtained.
Generally, principal and interest payments received on nonaccrual
loans are applied as reductions of principal. For this reason and
because of charge-offs, the book value of such loans understates the
remaining contractual obligation of the borrowers. As of December 31,
1993, the carrying values of other real estate and nonperforming assets
had been written down to current estimates of their fair values less a
reserve for the estimated costs to sell the properties.
The following table presents nonperforming assets and those loans
which are contractually past due 90 days or more as to principal or
interest payments at December 31 for the past five years.
December 31,
--------------------------------------------
1993 1992 1991 1990 1989
--------------------------------------------
(Dollars in thousands)
Nonaccrual loans . . . . . . $ 194 $ 83 $ 243 $ 652 $ 1,034
------- -------- -------- -------- --------
Total nonperforming loans . 194 83 243 652 1,034
Other real estate and nonperforming
assets (including substantive
repossessions), net 35 345 538 664 684
------- -------- -------- -------- ---------
Total nonperforming assets. $ 229 $ 428 $ 781 $ 1,316 $ 1,718
======= ======== ======== ======== =========
Past due loans (90 days
or more) $ 27 $ 221 $ 208 $ -- $ 331
======= ======== ======== ========== =======
Nonperforming assets/year-end
loans plus other real estate
and nonperforming assets .88% 1.73% 3.12% 9.31% 14.01%
Nonperforming assets/year-end
assets .51% 1.16% 2.02% 6.73% 8.74%
Nonperforming assets decreased $199,000 or 46.5% from
December 31, 1992 to total $229,000 at the end of 1993. At December
31, 1993, total nonperforming assets represented 0.88% of total loans
plus other real estate owned and nonperforming assets and 0.51% of
total assets as compared to 1.73% and 1.16%, respectively, at
December 31, 1992.
Management continues to focus on asset quality. An emphasis is
placed on pro-active management of problem credits, early detection of
potential problems, and timely charge-offs. A separate work-out plan
is developed for the resolution and collection of problem assets. An
analysis of nonperforming loans by type is provided in the following
table. There are no significant concentrations of nonperforming assets
in any one market or industry.
December 31,
--------------------------------------------
1993 1992 1991 1990 1989
-------- ------- -------- -------- --------
(In thousands)
Commercial and industrial. . $ 86 $ 82 $ 193 $ 531 $ 760
Real estate. . . . . . . . . 73 -- 46 121 252
Consumer . . . . . . . . . . 35 1 4 -- 22
------- -------- -------- -------- ---------
Total nonperforming loans . $ 194 $ 83 $ 243 $ 652 $ 1,034
======== ======== ======== ======== ========
Potential Problem Loans
- -----------------------
Certain loans classified for regulatory purposes as doubtful,
substandard, or special mention are included in the nonperforming loan
table.
Allowance for Credit Losses
- ---------------------------
The allowance for credit losses is the amount deemed by
management to be reasonably necessary to provide for possible losses on
loans that may become uncollectible. Additions to the allowance are
charged to expense as the provision for credit losses. Loan losses and
recoveries are charged or credited directly to the allowance. It is
MBI's policy to charge off any loan or portion of that loan when it is
deemed to be uncollectible in the ordinary course of business.
An evaluation of the overall quality of the portfolio is
performed to determine the necessary level of the allowance for credit
losses. This evaluation takes into consideration the classification of
loans and the application of loss estimates to these classifications.
It is the responsibility of management to classify its loans as pass,
special mention, substandard, doubtful, or loss. The classification
criteria are established by the loan discount committee of MBI and are
intended to be consistent with the criteria applied by Federal banking
system examiners. These classifications take into consideration all
sources of repayment, underlying collateral, the value of such
collateral, and current and anticipated economic conditions, trends,
and uncertainties. MBI has an independent loan review function which
periodically reviews the loans and the classifications.
Loss factors are developed by loan type and classification using
historical loss data and statistical modeling techniques. The
application of these loss factors to the portfolio classifications
combined with analyses of general economic conditions, trends in
portfolio volume, maturity, and composition, and estimates of potential
future losses on specific large loans and those loans requiring special
attention provide management with data essential to identify and
estimate the credit risk inherent in the portfolio. The allowance for
credit losses reflects the result of these estimates, and is deemed to
be adequate at each balance sheet date.
As of December 31, 1993, the allowance for credit losses equaled
$360,000 or 1.38% of total loans and leases and 185.57% of
nonperforming loans. Comparatively, the allowance for credit losses
amounted to $348,000 or 1.43% of total loans and 419.28% of
nonperforming loans at December 31, 1992. The decreased level of net
charge-offs in 1993 and the sound coverage ratio of the allowance for
credit losses to nonperforming loans at December 31, 1993 reflected the
continuing emphasis management is placing on resolving problem loans,
reducing the risk profile of MBI, and prudently reserving for
identifiable risks.
The allowance for credit losses has been allocated by loan
category. It should be recognized that such allocations are not
necessarily indicative of future loan losses and that all of such
allowance is available to absorb losses on loans for any category. The
allocation of the allowance for credit losses by loan type is as
follows:
December 31,
----------------------------------------
1993 1992 1991 1990 1989
------ ------- ------- ------- ---------
(In thousands)
Commercial and industrial. . $ 85 $ 85 $ 74 $ 148 $ 203
Real estate:
Construction. . . . . . . . 39 24 14 12 21
Secured by 1-4 family residences 143 134 132 57 69
Permanent commercial real estate 19 5 5 6 9
Loans to individuals . . . . 73 89 81 49 34
Agriculture. . . . . . . . . 1 9 7 17 15
Other. . . . . . . . . . . . -- 2 1 1 --
------ ------- ------- ------- -------
Total. . . . . . . . . . . . $ 360 $ 348 $ 314 $ 290 $ 351
====== ======= ======= ======= =======
The following table compares the allocation of the allowance for
credit losses by loan type expressed as a percentage of the total
allowance for credit losses to the percentage of loans in each loan
type to total loans:
December 31,
--------------------------------------------
1993 1992 1991 1990 1989
--------------------------------------------
Commercial and industrial. . 23.6% 24.3% 23.6% 51.1% 57.8%
Real estate:
Construction. . . . . . . . 10.8 7.0 4.5 4.2 5.9
Secured by 1-4 family
residences 39.7 38.5 42.0 19.7 19.7
Permanent commercial real
estate 5.3 1.4 1.6 2.1 2.6
Loans to individuals . . . . 20.3 25.6 25.8 16.9 9.7
Agriculture. . . . . . . . . .3 2.6 2.2 5.9 4.3
Other. . . . . . . . . . . . -- .6 .3 .1 --
----------------------------------------------
Total. . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ========
The following table summarizes the changes in the allowance for credit
losses for the past five years and presents selected related ratios.
Year Ended December 31,
-----------------------------------------
1993 1992 1991 1990 1989
--------- ------ -------- ------ --------
(Dollars in thousands)
Balance at January 1,
as previously reported $ 348 $ 314 $ 290 $ 351 $ 350
Charge-offs:
Commercial and industrial 2 91 69 241 465
Real estate . . . . . . . -- 4 15 87 157
Consumer. . . . . . . . . 32 56 44 24 36
----------------------------------------
Total charge-offs. . . . 34 151 128 352 658
----------------------------------------
Recoveries:
Commercial and industrial 8 12 7 46 48
Real estate . . . . . . . -- -- -- 2 28
Consumer. . . . . . . . . 8 13 4 9 14
----------------------------------------
Total recoveries . . . . 16 25 11 57 90
----------------------------------------
Net loans and leases
charge-offs 18 126 117 295 568
Provision for credit losses 30 160 141 234 569
----------------------------------------
Balance at December 31 . . $ 360 $ 348 $ 314 $ 290 $ 351
======= ======= ======= ======= =========
Loans and leases at
year end $ 26,026 $24,400 $24,457 $13,467 $11,580
Average loans and leases . $ 24,924 $24,099 $20,826 $12,177 $11,630
Net charge-offs/average
loans and leases .07% .52% .56% 2.42% 4.88%
Allowance for credit
losses/net charge-offs 2,000.00% 276.19% 268.38% 98.31% 61.80%
Allowance for credit
losses/year end
nonperforming loans . . . 185.57% 419.28% 129.22% 44.48% 33.95%
Allowance for credit
losses/year end
nonperforming assets. . . 157.21% 81.31% 40.20% 22.04% 20.43%
Allowance for credit
losses/year end
loans and leases. . . . . 1.38% 1.43% 1.28% 2.15% 3.03%
Investment Portfolio
- --------------------
The year-end book value of investment securities at December 31 for each of
the last three years is presented in the tables below.
Held-to-maturity
December 31,
-------------------------
1993 1992 1991
-------------------------
(In thousands)
U.S. Treasury obligations. . . . . . . . $ 7,817 $ 4,845 $ 6,846
Obligations of U.S. government agencies
and corporations:
Mortgage-backed . . . . . . . . . . . . -- -- --
Other . . . . . . . . . . . . . . . . . -- -- --
Obligations of state and political
subdivisions 2,986 2,815 --
Other securities:
Privately issued collateralized
mortgage obligations -- -- --
Other . . . . . . . . . . . . . . . . . 26 26 26
------------------------
Total. . . . . . . . . . . . . . . . . . $ 10,829 $ 7,686 $ 6,872
========================
Market value in excess of book value . . $ 136 $ -- $ 142
========================
Effective for the first quarter of 1994, MBI adopted a policy of
classifying certain United States Treasury securities and obligations
of United States government corporations and agencies as "available for
sale" in accordance with the guidelines of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities".
Investment securities increased $3.1 million between December 31,
1992 and 1993.
Excluding U.S. Treasury obligations and obligations of U.S.
government agencies and corporations, there were no security holdings
of any one issuer at December 31, 1993 that exceeded 10% of
consolidated stockholders' equity.
The tables below summarize the maturity and yield distribution of
investment securities at December 31, 1993.
<TABLE>
<CAPTION>
Maturing
----------------------------------------------------------------------------------------
After one After five
Within but within but within After
one year five years ten years ten years Total
--------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
-------- ------ -------- ------ -------- ------ -------- ------ -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations $ 2,667 4.89% $ 5,150 4.15% $ -- --% $ -- --% $ 7,817 4.44%
Obligations of U.S. government
agencies and corporations:
Mortgage-backed. . . -- -- -- -- -- -- -- -- -- --
Other. . . . . . . . -- -- -- -- -- -- -- -- -- --
Obligations of states and
political subdivisions -- -- 175 3.50 2,811 5.10 -- -- 2,986 5.00
Other securities (1). -- -- -- -- -- -- 26 N/A 26 N/A
-------------------------------------------------------------------------------
Total . . . . . . . . $ 2,667 4.89% $ 5,325 4.13% $ 2,811 5.10% $ 26 N/A% $ 10,829 4.58%
===============================================================================
<FN>
- -----------
(1) 200 shares of Bankers Bancorp of Oklahoma, Inc. common class "A" voting stock.
</TABLE>
MBI's strong liquidity position demonstrates MBI's ability to
hold a substantial portion of its investment securities to maturity.
Deposits
- --------
Average total deposits increased $1,853,000 or 5.61% between
December 31, 1993 and 1992. At December 31, 1993, deposits totaled
$34.9 million which compares to $33.0 million deposits at December 31,
1992. Core deposits (demand, interest checking, savings, and time
deposits under $100,000) represented 87.19% of total deposits at
December 31, 1993 compared to 84.35% at December 31, 1992.
The following table provides a breakdown of average deposits and
average rates paid, by type, for the past three years.
1993 1992 1991
------------------- ---------------- ----------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
-----------------------------------------------------
(Dollars in thousands)
Noninterest-bearing deposits $ 5,341 --% $ 4,605 --% $ 3,815 --%
------- -------- --------
Interest-bearing deposits:
Interest-bearing checking
deposits 8,427 3.15 8,883 3.66 8,238 5.07
Savings deposits. . . 1,367 2.95 1,253 3.60 1,177 4.34
Time deposits
under $100,000 15,293 4.31 13,132 5.49 12,500 5.76
Time deposits of
$100,000 or more 4,468 2.43 5,170 5.00 4,765 5.22
------- ------ ------
Total interest-
bearing deposits 29,555 3.86 28,438 4.75 26,680 5.53
------- ------- -------
Total deposits . . . $ 34,896 $ 33,043 $ 30,495
======== ======== ========
The following table sets forth, by time remaining to maturity, certificates
and other time deposits of $100,000 or more:
December 31,
1993
--------------
(In thousands)
Under three months . . . . . . . . . . . . . . . . .$ 1,429
Over three months through twelve months. . . . . . . 4,312
Over one year through five years . . . . . . . . . . --
Over five years. . . . . . . . . . . . . . . . . . . --
--------------
Total. . . . . . . . . . . . . . . . . . . . . . . .$ 5,741
==============
Brokerage deposits were immaterial at December 31, 1993.
Short-term Borrowings
- ---------------------
Short-term borrowings consist of securities sold under agreements
to repurchase and notes payable. Amounts and interest rates related to
short-term borrowings for the last three years were as follows:
1993 1992 1991
-------- -------- --------
(Dollars in thousands)
Federal funds purchased:
Outstanding at year-end . . . . . . . . $ -- $ 207 $ --
Average interest rate at year-end . . . N/A 2.9% N/A
Average outstanding at quarter-end during
the year $ 9 $ 122 $ --
Weighted average interest rate. . . . . 2.9% 2.9% N/A
Highest outstanding balance at any
quarter-end $ -- $ 687 $ --
Notes payable:
Outstanding at year-end . . . . . . . . $ 44 $ 44 $ 44
Average interest rate at year-end . . . 8% 8% 8%
Average outstanding at quarter-end
during the year $ 44 $ 44 $ 44
Weighted average interest rate. . . . . 8% 8% 8%
Highest outstanding balance at
any quarter-end $ 44 $ 44 $ 1,826
Asset and Liability Management
- ------------------------------
Interest Rate Risk: MBI manages its assets and liabilities to
control the exposure of its net interest income and capital to risks
associated with interest rate changes and to achieve consistent growth
in net interest income. Interest rate risk is evaluated using various
tools, including interest sensitivity gap and simulation analysis.
The following table presents MBI's interest sensitivity gap
position as of December 31, 1993. This table depicts the timing of the
contractual maturity or repricing of most assets and liabilities at
this date. Fixed-rate mortgage-backed securities are included in
repricing-maturity categories based upon estimates of prepayments
provided by a third-party market information service. These estimates
may vary depending upon both the volatility and the level of market
interest rates in relationship to the coupon rates of the underlying
mortgages. Interest-bearing checking and savings deposits are included
in the under-three-month category. This table does not indicate the
effect the repricing of assets and liabilities would have on net
interest income. Also, it does not reflect interest rate exposures,
such as basis risk, prepayment risk, intra-period sensitivity, and the
effect of interest rate floors and ceilings associated with certain
financial instruments.
Three Six
Under Through Through Over Not
Three Six Twelve One Rate
Months Months Months Year Sensitive Total
-----------------------------------------------------
(Dollars in thousands)
Assets:
Loans and leases $ 9,714 $ 2,521 $ 5,292 $ 8,499 $ -- $ 26,026
Investment securities 600 704 1,364 8,135 26 10,829
Other earning assets 4,295 -- -- -- -- 4,295
Nonearning assets -- -- -- -- 4,156 4,156
-------- --------- ------- -------- --------- --------
Total assets $ 14,609 $ 3,225 $ 6,656 $ 16,634 $ 4,182 $ 45,306
======== ======== ======== ======== ========= ========
Liabilities and
stockholders' equity:
Deposits $ 14,958 $ 4,053 $ 12,070 $ 3,720 $ 5,428 $ 40,229
Long-term debt -- -- -- 44 -- 44
Other liabilities -- -- -- -- 316 316
Stockholders' equity -- -- -- -- 4,717 4,717
-------- -------- -------- -------- --------- --------
Total liabilities and
stockholders' equity $ 14,958 $ 4,053 $ 12,070 $ 3,764 $ 10,461 $ 45,306
======== ======== ======== ======== ========= ========
Repricing gap $ (349)$ (828)$ (5,414)$ 12,870 $ (6,279) $ --
Cumulative repricing
gap $ (349)$ (1,177)$ (6,591)$ 6,279 $ -- $ --
Cumulative rate-sensitive
assets/rate-sensitive
liabilities .98 .94 .79 (*) (*)
- -----------
(*) Not meaningful
MBI has a negative cumulative repricing gap of .79:1 in the one-
year horizon. Consequently, it is more sensitive to a rising rate
environment which, if it occurred, would adversely impact the net
interest margin. Simulation modeling has demonstrated that a sudden
and large increase in rates or a dramatic narrowing in the spread
between asset yields and liability costs would result in an adverse
impact on the net interest margin; however, the adverse impact is more
moderate if interest rates increase gradually.
Liquidity: MBI's consolidated statements of cash flows are
presented elsewhere in this report. These statements distinguish cash
flows as operating, investing, and financing. They provide a
historical accounting of MBI's ability to generate cash required to
meet its customers' and creditors' demands. Certain statement-of-
condition items and ratios are indicative of MBI's strong liquidity
position at December 31, 1993. The loans-to-deposits and loans-to-
assets ratios averaged 71.42% and 62.45%, respectively, during 1993.
During 1993, average core deposits (demand, interest checking, savings,
and time deposits under $100,000) represented 87.19% of total deposits
and 76.24% of average assets.
At December 31, 1993, other borrowings totaled $44,000. At that
same date, additional borrowing liquidity was also available in the
form of $9.7 million of unpledged investment securities which could
secure short-term borrowing requirements. Regular maturities also
generate significant liquidity.
MBI had commitments to extend credit at December 31, 1993, of
$2.0 million. Some of these commitments will not be fully utilized,
others will expire without being drawn upon, and the commitments will
not all be used at the same time. Accordingly, management anticipates
that MBI has ample liquidity to meet these and other demands.
Capital Resources
- -----------------
At December 31, 1993, total stockholders' equity was $4.7 million
or 11.86% of total assets compared to $4.7 million or 12.51% of total
assets at December 31, 1992. For 1993, total stockholders' equity
averaged $4.7 million or 11.86% of average assets. The prior year
average equity was $4.8 million or 12.51% of average assets.
Banking system regulators apply two measures of capital adequacy
to banking companies: the risk-based capital and leverage ratios. The
risk-based capital rules provide for the weighting of assets and
off-balance-sheet commitments and contingencies according to prescribed
risk categories ranging from 0 to 100%. Regulatory capital is then
divided by risk-weighted assets to determine the risk-adjusted capital
ratios. The leverage ratio supplements the risk-based capital
guidelines by placing a constraint on the degree to which a banking
company can leverage its equity capital, regardless of the balance
sheet composition. The leverage ratio is computed by dividing Tier I
capital by quarter-to-date average assets less certain intangibles.
The following table presents MBI's risk-based capital and
leverage ratios together with the required minimums.
December 31,
-----------------
1993 1992
-----------------
(In thousands)
Tier I capital:
Common stockholders' equity . . . . . . . . . $ 2,802 $ 2,802
Preferred stockholders' equity . . . . . . . 1,915 1,915
Less intangible assets. . . . . . . . . . . . ( 1,720) ( 1,863)
-------- ------
Total Tier I capital . . . . . . . . . . . . 2,997 2,854
Tier II capital:
Allowance for credit losses (1) . . . . . . . 360 348
-------- ------
Total capital. . . . . . . . . . . . . . . . . $ 3,357 $ 3,202
======== ======
Risk weighted assets . . . . . . . . . . . . . $ 25,530 $ 23,353
======== =======
Adjusted average assets (2). . . . . . . . . . $ 38,187 $ 36,278
======== ========
Regulatory
minimums
----------
Risk-based capital ratios:
Tier I. . . . . . . . . . . . . . . . . 4.0% 11.74% 12.22%
Tier II . . . . . . . . . . . . . . . . 8.0 13.15 13.71
Leverage ratio. . . . . . . . . . . . . 3.0 7.85 7.87
- ---------
(1)Limited to 1.50% risk weighted assets.
(2)Quarterly average assets less intangibles.
As indicated in the preceding table, MBI's risk-based and
leverage capital ratios substantially exceed the minimums required by
banking system regulators.
The Federal Deposit Insurance Corporation adopted final
regulations under the Federal Deposit Insurance Corporation Improvement
Act, effective June 16, 1992. A bank is typically defined to be "well
capitalized" if it maintains a Tier I capital ratio of at least 6.0%,
a total risk-based capital ratio of at least 10.0% and a leverage
ratio of at least 5.0%. Generally, it is MBI's intention to maintain
sufficient capital in its bank subsidiary to permit it to maintain a
"well capitalized" designation. The capital ratios for MBI exceeded
the "well capitalized" regulatory capital requirements at December 31,
1993.
Recently Issued Accounting Standards
- ------------------------------------
In May 1993, the Financial Accounting Standards Board issued
Financial Accounting Standard ("FAS") No. 114 which could have an
effect on MBI in 1994 and after. FAS No. 114 addresses the accounting
by creditors for impairment of certain loans. It is applicable to all
creditors and to all loans, uncollateralized as well as collateralized,
except large groups of smaller-balance homogeneous loans that are
collectively evaluated for impairment, loans that are measured at fair
value or at the lower of cost or fair value, leases, and debt
securities. It applies to all loans that are restructured in a
troubled debt restructuring involving a modification of terms. The
Statement requires that, when evaluating the need for an allowance for
credit losses on impaired loans that are within the scope of this
Statement, the loss accrual be measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market
price or the fair value of the collateral if the loan is collateral-
dependent. This Statement is effective for fiscal years beginning
after December 15, 1994. MBI has not completed the analyses required
to estimate the impact of FAS 114; however, MBI does not believe the
adoption of the new rules will have an adverse effect on its financial
condition.
Effects of Inflation and Changing Prices
- ----------------------------------------
Virtually all assets and liabilities of a banking organization
are monetary in nature. As such, they represent obligations to pay or
receive fixed and determinable amounts of money which are not affected
by future changes in prices. Changes in interest rates are the
greatest determinant of bank earnings. However, interest rates do not
necessarily move in the same direction or with the same magnitude as
prices of other goods and services. A financial institution can
respond to changes in interest rates by matching the maturities and
costs of its liabilities against its interest earning assets. How well
the institution copes with changing interest rates may then be
determined by examining its net yield on earning assets and analyzing
its asset and liability structure. Accordingly, reference to the
various supplementary schedules shown elsewhere in this report will
assist in the understanding of how MBI is positioned to react to
changing interest rates and inflationary trends.
Quarterly Financial Data (Unaudited)
- ------------------------------------
1993
--------------------------------------
4th 3rd 2nd 1st
-------------------------------------
(Dollars in thousands, except per share data)
Summary Income Statement Information:
Interest income . . . . . . . . . $ 876 $ 781 $ 813 $ 736
Interest expense. . . . . . . . . 323 291 267 265
-------- -------- -------- --------
Net interest income . . . . . . . 553 490 546 471
Provision for credit losses . . . -- -- 10 20
-------- ------- ------- --------
Net interest income after
provision for credit losses 553 490 536 451
Investment securities gains . . . -- -- -- 6
Other noninterest income. . . . . 76 73 84 89
Noninterest expense . . . . . . . (452) (383) (407) (386)
--------- ------- -------- --------
Income before income taxes. . . . 177 180 213 160
Income tax expense. . . . . . . . 53 55 65 47
-------- -------- -------- --------
Net income . . . . . . . . . . . $ 124 $ 125 $ 148 $ 113
======== ======== ======== ========
Net income applicable to
common stock $ (11) $ (25) $ 23 $ 13
========= ======== ======= ========
Per Share Data:
Earnings per common share. . . . . $ (.01) $ (.03) $ .03 $ .01
========= ======== ======= ========
Common dividends . . . . . . . . . $ -- $ -- $ -- $ --
========= ======== ======== =======
1992
----------------------------------------
4th 3rd 2nd 1st
-------------------------------------
(Dollars in thousands, except per share data)
Summary Income Statement Information:
Interest income . . . . . . . . . $ 872 $ 864 $ 873 $ 997
Interest expense. . . . . . . . . 280 322 362 395
------- -------- -------- ---------
Net interest income . . . . . . . 592 542 511 602
Provision for credit losses . . . 50 10 40 60
------- -------- -------- ---------
Net interest income after
provision for credit losses 542 532 471 542
Investment securities gains . . . 52 58 93 --
Other noninterest income. . . . . 71 60 106 108
Noninterest expense . . . . . . . (560) (412) (396) (393)
------- -------- -------- ---------
Income before income taxes and
extraordinary item . . . . . . . 105 238 274 257
Income tax expense. . . . . . . . 103 81 13 129
------- -------- -------- ---------
Income before extraordinary item. $ 2 $ 157 $ 261 $ 128
Extraordinary item. . . . . . . . -- -- -- 130
-------- -------- --------- -------
Net income . . . . . . . . . . . $ 2 $ 157 $ 261 $ 258
======== ======== ======== ========
Net income applicable to
common stock $ (98) $ (93) $ 261 $ 258
========= ======== ======= ========
Per Share Data:
Earnings per common share. . . . . $ (.11) $ (.10) $ .29 $ .29
========= ======== ======= ========
Common dividends . . . . . . . . . $ -- $ -- $ -- $ --
========= ======== ======== =======
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
First National Bank and Trust
Company in Dodge City
Dodge City, Kansas
We have audited the accompanying consolidated statements of condition of
First National Bank and Trust Company in Dodge City and Subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of
income, changes in stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1993. These consolidated
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
National Bank and Trust Company in Dodge City and Subsidiaries as of
December 31, 1993 and 1992, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1993, in conformity with generally accepted accounting principles.
As discussed in Note 13 to the consolidated financial statements, on
February 25, 1994, the Bank's parent, First Dodge City Bancshares, Inc.
entered into an Agreement and Plan of Reorganization with Fourth Financial
Corporation.
As discussed in Note 1 to the consolidated financial statements, the Bank
changed its method of accounting for deferred income taxes effective with
the beginning of the year ended December 31, 1993.
/s/ Smoll, Banning and Neier, Chtd.
January 21, 1994, except for Note 13,
as to which the date is February 25, 1994
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
December 31,
----------------------
1993 1992
-------- --------
(In thousands)
<S> <C> <C>
ASSETS
------
Cash and cash equivalents:
Cash and due from depository institutions $ 6,036 $ 11,904
Federal funds sold 4,800 5,025
-------- --------
Total cash and cash equivalents 10,836 16,929
-------- --------
Interest-bearing deposits in depository
institutions 793 1,682
-------- --------
Investment securities (market value of $22,526
in 1993 and $36,027 in 1992) 22,266 35,446
-------- --------
Loans 68,265 57,546
Less-allowance for loan losses 889 992
-------- --------
Net loans 67,376 56,554
-------- --------
Bank premises and equipment 1,351 1,342
-------- --------
Other real estate owned 85 876
-------- --------
Other assets 2,083 2,191
-------- --------
Total assets $104,790 $115,020
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
Demand $ 20,933 $ 21,041
NOW and money market accounts 23,155 25,538
Savings 5,987 5,839
Time, $100,000 and over 7,748 8,206
Other time 31,864 36,911
-------- --------
Total deposits 89,687 97,535
-------- --------
Securities sold under agreements to repurchase 5,307 7,769
-------- --------
Other liabilities 604 621
-------- --------
Stockholders' equity:
Common stock; $100 par value; 6,000 shares
authorized, issued and outstanding 600 600
Surplus 1,000 1,000
Retained earnings 7,592 7,495
-------- --------
Total stockholders' equity 9,192 9,095
-------- --------
Commitments and contingencies
Total liabilities and stockholders' equity $104,790 $115,020
======== ========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31,
----------------------------
1993 1992 1991
-------- -------- --------
(In thousands, except
per share amounts)
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 5,434 $ 5,560 $ 6,690
Interest on Federal funds sold 154 190 282
Interest from depository institutions 45 191 584
Interest on investment securities:
U.S. Treasury and government agencies 1,411 2,219 1,940
States and political subdivisions 328 167 214
-------- -------- --------
Total interest income 7,372 8,327 9,710
-------- -------- --------
Less interest expense on:
Deposits 2,328 3,155 4,840
Securities sold under agreements
to repurchase 237 313 208
Borrowed funds 14 27
-------- -------- --------
Total interest expense 2,565 3,482 5,075
-------- -------- --------
Net interest income 4,807 4,845 4,635
Provision (benefit) for loan losses ( 122) ( 145) 120
-------- -------- --------
Net interest income after provision
(benefit) for loan losses 4,929 4,990 4,515
Non-interest income:
Service charges on deposit accounts 606 546 551
Trust department 268 201 219
Net investment securities gains 168 181
Other 259 166 215
-------- -------- --------
Net interest and non-interest income 6,230 6,084 5,500
-------- -------- --------
Non-interest expenses:
Salaries and employee benefits 1,955 1,797 1,655
Net occupancy expense 331 303 301
Other operating expenses 1,621 1,383 1,238
-------- -------- --------
Total non-interest expenses 3,907 3,483 3,194
-------- -------- --------
Income before income taxes 2,323 2,601 2,306
Income taxes 764 929 803
-------- -------- --------
Income before cumulative effect of
change in accounting principle 1,559 1,672 1,503
-------- -------- --------
Cumulative effect of change in
accounting for income taxes 73
-------- -------- --------
Net income $ 1,632 $ 1,672 $ 1,503
======== ======== ========
Earnings per common share:
Income before cumulative effect $ 259.83 $ 278.67 $ 250.50
Cumulative effect of change in
accounting principle 12.17
-------- -------- --------
Net income per share $ 272.00 $ 278.67 $ 250.50
======== ======== ========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Retained
stock Surplus earnings Total
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Balance, December 31, 1990 $ 600 $ 1,000 $ 7,025 $ 8,625
Net income 1,503 1,503
Dividends paid ( 1,405) ( 1,405)
-------- -------- -------- --------
Balance, December 31, 1991 600 1,000 7,123 8,723
Net income 1,672 1,672
Dividends paid ( 1,300) ( 1,300)
-------- -------- -------- --------
Balance, December 31, 1992 600 1,000 7,495 9,095
Net income 1,632 1,632
Dividends paid ( 1,535) ( 1,535)
-------- -------- -------- --------
Balance, December 31, 1993 $ 600 $ 1,000 $ 7,592 $ 9,192
======== ======== ======== ========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
----------------------------
1993 1992 1991
-------- -------- --------
(In thousands)
Increase (decrease) in cash and
cash equivalents:
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,632 $ 1,672 $ 1,503
Adjustments to reconcile net income to
net cash provided by operating activities:
Cumulative effect of change in
accounting for income taxes ( 73)
Depreciation 213 168 141
Gain on sale of assets ( 2) ( 2)
Provision (benefit) for loan losses ( 122) ( 145) 120
Loss on sale and write-down of
other real estate owned 340 106 34
Write-down of other assets owned 16
Deferred income taxes 40 40 7
Net investment securities gains ( 168) ( 181)
Discount accretion on investment
securities ( 51) ( 18) ( 20)
Premium amortization on investment
securities 226 135 84
Amortization of core deposit intangible 54 54 63
Decrease (increase) in interest
receivable 50 69 ( 25)
Decrease in interest payable ( 82) ( 204) ( 132)
(Decrease) increase in accrued
income taxes 149 ( 434) 204
Other, net ( 63) 112 ( 13)
-------- -------- --------
Net cash provided by operating activities 2,161 1,372 1,964
-------- -------- --------
Cash flows from investing activities:
Net decrease in interest-bearing
deposits in depository institutions 889 4,653 2,377
Purchases of investment securities ( 8,701) (17,266) (14,727)
Proceeds from sales and maturities
of investment securities 21,875 8,804 10,340
Net decrease (increase) in loans (10,729) 3,614 607
Additions to bank premises and equipment ( 230) ( 493) ( 146)
Proceeds from sale of bank premises
and equipment 8 2
Proceeds from sale of other assets
and other real estate owned 480 241 592
-------- -------- --------
Net cash provided by (used in)
investing activities 3,592 ( 447) ( 955)
-------- -------- --------
Cash flows from financing activities:
Net increase (decrease) in demand
and savings deposits ( 2,343) 2,097 2,990
Net decrease in time deposits ( 5,505) ( 2,547) ( 9,887)
Net increase (decrease) in securities
sold under agreements to repurchase ( 2,463) ( 6,756) 14,525
Repayments of borrowed funds ( 138) ( 123)
Dividends paid ( 1,535) ( 1,300) ( 1,405)
-------- -------- --------
Net cash provided by (used in)
financing activities (11,846) ( 8,644) 6,100
-------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED
Year ended December 31,
----------------------------
1993 1992 1991
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Increase (decrease) in cash
and cash equivalents ( 6,093) ( 7,719) 7,109
Cash and cash equivalents, beginning
of year 16,929 24,648 17,539
-------- -------- --------
Cash and cash equivalents, end of year $ 10,836 $ 16,929 $ 24,648
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 2,648 $ 3,686 $ 5,207
======== ======== ========
Income taxes $ 576 $ 1,324 $ 591
======== ======== ========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
1. Summary of significant accounting policies
------------------------------------------
General
-------
The accounting and reporting policies of the consolidated group conform to
generally accepted accounting principles and to general practice within e
the banking industry. In accordance with the usual practice of banks,
assets and liabilities of individual trust funds are not included in these
consolidated financial statements.
Principles of consolidation
---------------------------
The consolidated financial statements are comprised of the accounts of
First National Bank and Trust Company in Dodge City and its wholly owned
subsidiaries, First Ag Credit Corporation and Southwest, Inc. All
significant intercompany transactions and accounts have been eliminated in
consolidation. The Bank is a majority owned subsidiary of First National
Bancshares of Dodge City, Inc.
Cash and due from banks
-----------------------
Cash and due from banks includes all non-interest bearing deposits with
other banks. At December 31, 1993, the Federal Reserve required the Bank
to maintain an average balance of approximately $773,000.
Investment securities
---------------------
Investment securities are those securities which the Bank has the ability
and intent to hold to maturity. These securities are stated at cost
adjusted for amortization of premiums and accretion of discounts, which
are recognized as adjustments to interest income. Gains or losses on the
sale of investment securities are recognized on the completed transaction
basis.
Effective for the first quarter of 1994, the Bank adopted a policy of
classifying all United States Treasury securities and obligations of
United States government corporations and agencies with maturities of five
years or less as "available for sale" in accordance with the guidelines of
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities".
Loans
-----
Loans are carried at principal amounts outstanding less unearned
discount. Loan losses are charged and recoveries are credited to the
allowance for loan losses. The allowance for loan losses is based on
management's judgement as to potential losses, after consideration of such
factors as recent loan losses and current economic conditions. Accrual of
interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts,
that the borrowers' financial condition is such that collection of
interest is doubtful.
The Bank grants agribusiness, commercial, real estate and personal loans
to customers in the Bank's market area. Although the Bank has a
diversified loan portfolio, a substantial portion of its debtors' ability
to honor their contracts is dependent upon the agribusiness economic
sector.
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
1. Summary of significant accounting policies-continued
----------------------------------------------------
Bank premises and equipment
---------------------------
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line method over
the estimated useful lives of the assets. Gains and losses on dispositions
are credited or charged to income. Maintenance and repairs are charged
to expense as incurred. Bank premises and equipment are being
depreciated over the following estimated useful lives:
Category Years
-------- -----
Building premises 15-20
Furniture, fixtures and equipment 3-10
Other real estate owned
-----------------------
Other real estate owned consists of properties acquired through
foreclosure or loan settlement. Individual properties are stated at the
lower of fair market value or the carrying amount of the loan at the time
of acquisition. Gains or losses on dispositions are credited or charged
to income.
Income taxes
------------
The Bank is a member of a group which files a consolidated federal income
tax return. Income taxes are allocated to members of the group based on
their respective incomes.
Income taxes are provided for the tax effects of transactions reported on
the financial statements and consist of income taxes currently due plus
deferred income taxes. The deferred income taxes represent the future
income tax return consequences of temporary differences in the recognition
of income and expense for tax and financial statement purposes.
Deferred taxes are computed as prescribed in Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS
No. 109 requires deferred tax balances to be adjusted to reflect the tax
rates in effect when those amounts are expected to become payable or
refundable. SFAS No. 109 is effective for fiscal years beginning after
December 15, 1992 and the Bank adopted SFAS No. 109 in the first quarter
of 1993. The cumulative effect of the change in accounting principle was
$72,761 and resulted in an increase to the deferred tax asset of the Bank.
Off-balance-sheet financial instruments
---------------------------------------
In the ordinary course of business the Bank has entered into off-balance-
sheet financial instruments consisting of commitments to extend credit,
commitments under credit card arrangements, commercial letters of credit
and standby letters of credit. Such financial instruments are recorded
in the financial statements when they are payable.
Statements of cash flows
------------------------
For purposes of the statements of cash flows, the Bank has defined cash
and cash equivalents as those amounts included in the consolidated
statements of condition captions "Cash and due from depository
institutions" and "Federal funds sold".
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
2. Investment securities
---------------------
Investment securities with an amortized cost of $11,459,076 were pledged
to secure U.S. Government deposits, other public funds and trust
deposits at December 31, 1993.
The amortized cost and approximate market value of investment securities
follows:
<TABLE>
<CAPTION>
December 31, 1993:
Gross Gross Estimated
Amortized unrealized unrealized market
cost gains losses value
--------- ---------- ----------- -----------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury
securities and
obligations of
U.S. Government
corporations
and agencies $ 10,898 $ 176 $ $ 11,074
Obligations of
states and
political
subdivisions 9,102 146 ( 20) 9,228
Mortgage-backed
securities 2,218 6 ( 48) 2,176
Other 48 48
----------- ----------- ----------- -----------
Total $ 22,266 $ 328 $( 68) $ 22,526
=========== =========== =========== ===========
December 31, 1992:
U.S. Treasury
securities and
obligations of
U.S. Government
corporations
and agencies $ 24,849 $ 527 $( 8) $ 25,368
Obligations of
states and
political
subdivisions 4,049 35 ( 15) 4,069
Mortgage-backed
securities 6,500 92 ( 50) 6,542
Other 48 48
----------- ----------- ----------- -----------
Total $ 35,446 $ 654 $( 73) $ 36,027
=========== =========== =========== ===========
</TABLE>
The amortized cost and estimated market value of investment securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
2. Investment securities-continued
-------------------------------
<TABLE>
<CAPTION>
Estimated
Amortized market
cost value
----------- -----------
(In thousands)
<S> <C> <C>
Due in one year or less $ 5,351 $ 5,419
Due after one year through five years 13,331 13,538
Due after five years through ten years 1,318 1,345
Due after ten years 48 48
----------- -----------
20,048 20,350
Mortgage backed securities 2,218 2,176
----------- -----------
Total $ 22,266 $ 22,526
=========== ===========
</TABLE>
Proceeds from sales and maturities of investment securities were
$21,875,063, $8,804,618 and $10,340,440, in 1993, 1992 and 1991,
respectively. Gross gains of $168,220 and $180,924 were realized on those
sales in 1993 and 1992, respectively. Gross losses of $36 were
realized on sales in 1991.
3. Loans and allowance for loan losses
-----------------------------------
A distribution of loans follows:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
------------------------ ------------------------
Amount Percent Amount Percent
----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Loans to farmers $ 31,277 45.8% $ 26,129 45.4%
Commercial and
industrial
loans 14,138 20.7 9,248 16.1
Real estate
loans 18,310 26.8 16,805 29.2
Loans to
individuals 4,289 6.3 4,908 8.5
Loans to states
and political
subdivisions 34 .1 41 .1
All other loans 217 .3 415 .7
----------- ----------- ----------- -----------
Total loans $ 68,265 100.0% $ 57,546 100.0%
=========== =========== =========== ===========
</TABLE>
Loans on which the accrual of interest has been discounted or reduced
amounted to $12,849 and $314,381 at December 31, 1993 and 1992,
respectively. If interest on those loans had been accrued, such income
would have approximated $503 for 1993 and $19,502 for 1992.
At December 31, 1993, fixed rate loans amounted to $25,975,537 and
variable rate loans amounted to $42,286,086.
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
3. Loans and allowance for loan losses-continued
---------------------------------------------
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Balance at January 1 $ 992 $ 1,020 $ 1,054
Net provision (benefit)
charged (credited)
to income ( 122) ( 145) 120
Recoveries 50 329 19
----------- ----------- -----------
920 1,204 1,193
Less-loans charged off 31 212 173
----------- ----------- -----------
Balance at December 31 $ 889 $ 992 $ 1,020
=========== =========== ===========
</TABLE>
4. Bank premises and equipment
---------------------------
A summary of bank premises and equipment follows:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
(In thousands)
<S> <C> <C>
Land, buildings and components $ 2,395 $ 2,373
Furniture, fixtures and equipment 959 806
----------- -----------
3,354 3,179
Less-accumulated depreciation 2,003 1,837
----------- -----------
Net bank premises and equipment $ 1,351 $ 1,342
=========== ===========
</TABLE>
Depreciation expense amounted to $213,088 in 1993, $167,744 in 1992, and
$140,777 in 1991.
5. Core deposit intangible
-----------------------
The amortized balance of core deposit intangible of $116,238 and $170,504
at December 31, 1993 and 1992, respectively, is included in other assets
and represents the excess of liabilities assumed over assets acquired from
the Dodge City branch of Valley Savings in 1990. The intangible is being
amortized over a period of six years based on a study of the deposits
acquired. Amortization expense amounted to $54,266 in 1993 and 1992 and
$63,310 in 1991.
6. Securities sold under agreements to repurchase
----------------------------------------------
The Bank has agreements to sell and repurchase certain marketable
securities. Due to the agreements to repurchase, the sales of these
securities are not recorded. Instead, the liabilities to repurchase
securities sold under these agreements are reported as liabilities and the
investments acquired with the funds received from the securities sold are
included in cash and cash equivalents and/or investment securities.
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
7. Income taxes
------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Deferred tax assets:
Provision for credit
losses $ 80 $ 49 $ 7
Write-down (-up) of other
real estate owned 21 ( 11) ( 8)
Amortization relating to
intangible assets 3 1 ( 6)
Charitable contributions
carryforward from prior
years 15
Accrued bonus currently
deductible 7
Other, net 12 1 ( 2)
----------- ----------- -----------
Total deferred tax assets 116 47 6
----------- ----------- -----------
Deferred tax liabilities:
Depreciation expense ( 73) ( 7) 1
----------- ----------- -----------
Total deferred tax
liabilities ( 73) ( 7) 1
----------- ----------- -----------
Net deferred tax asset $ 43 $ 40 $ 7
=========== =========== ===========
</TABLE>
The consolidated provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
Liability
Method Deferred method
----------- ------------------------
(In thousands)
<S> <C> <C> <C>
Current income tax expense:
Federal $ 626 $ 735 $ 668
State 98 154 128
----------- ----------- -----------
724 889 796
Deferred income tax expense 40 40 7
----------- ----------- -----------
Total $ 764 $ 929 $ 803
=========== =========== ===========
</TABLE>
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
7. Income taxes-continued
----------------------
The provision for federal income taxes is less than that computed by
applying the federal statutory rate of 34% in 1993, 1992 and 1991, as
indicated in the following analysis:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Tax based on statutory rate $ 790 $ 884 $ 784
State income tax, net of
federal benefit 64 102 85
Tax effect of permanent
differences ( 91) ( 57) ( 69)
Other, net 1 3
----------- ----------- -----------
Total $ 764 $ 929 $ 803
=========== =========== ===========
</TABLE>
The components of deferred income taxes were principally related to the
allowance for loan losses, depreciation, and write-down (-up) of other
real estate owned.
8. Earnings per common share
-------------------------
Earnings per common share are based on the number of shares outstanding of
6,000 in 1993, 1992 and 1991.
9. Profit sharing plan
-------------------
The Bank has a noncontributory profit sharing plan covering substantially
all employees. Employees must meet certain criteria to become eligible to
participate in the profit sharing plan. They must complete 1,000 hours of
service during twelve consecutive months measured from the first day of
employment and upon meeting the requirements may enter the plan on the
next entry date (January 1 or July 1). There are no age requirements and
employees may make voluntary contributions. Discretionary employer
contributions are approved by the Board of Directors. Employer
contributions were $160,402 in 1993, $149,205 in 1992 and $142,654
in 1991.
10. Commitments and contingencies
-----------------------------
In the normal course of business, the Bank makes various commitments and
incurs certain contingent liabilities that are not presented in the
accompanying consolidated financial statements. The commitments and
contingent liabilities include unused commitments on lines of credit and
commitments to extend standby letters of credit. Since some of these
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
At December 31, 1993, unused commitments on lines of credit and
commitments under standby letters of credit were approximately
$22,421,000 and $388,100, respectively. The Bank does not anticipate
any material losses as a result of the commitments and
contingent liabilities.
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
11. Related parties
---------------
In the normal course of business, the Bank makes loans and enters into
other transactions with its officers and directors and their affiliates.
The Bank's policy relative to officer and director related loans is to
provide terms and conditions identical to terms and conditions
prevailing at the same time for comparable transactions with other
customers. An analysis of aggregate loan activity with this
group follows:
<TABLE>
<CAPTION>
1993
-----------
(In thousands)
<S> <C>
Loans outstanding at January 1 $ 1,391
New loans 6,498
Repayments ( 6,336)
Other changes 13
-----------
Loans outstanding at December 31 $ 1,566
===========
</TABLE>
Other changes include loans outstanding at December 31, 1992, to officers
who terminated employment in 1993 and changes in related individuals
extended lines of credit during 1993.
The Bank held demand and other deposits for related parties of
approximately $5,994,000 and $6,319,000 as of December 31, 1993
and 1992, respectively.
12. Regulatory matters
------------------
The Bank is subject to certain restrictions set forth by various
regulatory agencies. These restrictions include, among other things,
a limitation on the amount of dividends declared and requirements to
maintain minimum amounts of capital.
13. Subsequent event
----------------
The Bank declared a regular common stock dividend in the amount of
$149,635 as of January 12, 1994, payable on January 13, 1994.
On February 25, 1994, the Bank's parent, First Dodge City Bancshares, Inc.
("Bancshares"), entered into an Agreement and Plan of Reorganization
("Agreement") with Fourth Financial Corporation ("Fourth Financial"). The
Agreement provides for the simultaneous mergers of Bancshares, First
National Bancshares of Dodge City, Inc. ("FNB"), and Metro
Bancshares, Inc. ("MBI") into Fourth Financial, the merger of Metro
Bank of Broken Arrow, Broken Arrow, Oklahoma ("Metro Bank") into
BANK IV Oklahoma, National Association, and the merger of First National
Bank and Trust, Dodge City, Kansas ("First National") into BANK IV Kansas,
National Association. Consummation of the agreement is conditioned upon
several things, including (i) all governmental approvals being obtained
and continuing in effect, and (ii) receipt by Fourth Financial of
"affiliate agreements" from all persons identified by it as being
"affiliates" within the meaning of Securities and Exchange
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 and 1991
13. Subsequent event-continued
--------------------------
Commission rules. In the agreement, all outstanding capital stock
of Bancshares would be converted into an aggregate of 590,711 shares
of Fourth Financial Common Stock ("Fourth Stock").
The shares of capital stock of MBI (other than the shares owned by
Bancshares) and all of the capital stock of First National not owned by
FNB would be converted as set out in the Agreement. For purposes of
expense and convenience, cash will be paid in lieu of fractional shares
of Fourth Stock.
The Agreement includes a provision which limits the amount of dividends
that the Bank can pay prior to the merger transaction.
REPORT OF AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed of two independent
directors. The members of the Audit Committee at December 31, 1993
were George Herrmann and Dean R. Young. This committee held nine meetings
during the year ended December 31, 1993.
The Audit Committee has the responsibility to assist the Board of
Directors in performing its fiduciary duty to the existing and potential
stockholders of First National and to the investment community relating to the
accounting and reporting practices and the integrity of the financial reports
of First National. The committee recommended to the Board of Directors,
subject to stockholder approval, the selection of First National's independent
auditors, Smoll, Banning and Neier, Chartered.
The Audit Committee has discussed with the independent auditors and the
internal auditor the overall scope and specific plans for their respective
audits, First National's consolidated financial statements, and its internal
controls. The committee met regularly with First National's internal auditor
and independent auditors, without management present, to discuss the results
of their audits, First National's internal controls, and the overall quality
of its financial reporting. The committee has also reviewed the reports of bank
regulatory agencies. The committee was available to discuss, in private, any
matter desired by the internal auditor or the independent auditors.
REPORT OF MANAGEMENT
Management is responsible for the content of the financial statements
and related financial information included in this report. Management believes
that the financial statements have been prepared in conformity with generally
accepted accounting principles appropriate in the circumstances to reflect, in
all material respects, the substances of events and transactions that should be
included. The financial statements reflect management's judgments and estimates
as to the effects of events and transactions that are accounted for or
disclosed.
Management has long recognized the importance of First National's
maintaining and reinforcing the highest possible standards of conduct in all of
its actions, including the preparation and dissemination of statements fairly
presenting the financial condition of First National. In this regard, it has
developed a system of internal accounting controls which plays an important role
in assisting management in fulfilling its responsibilities in preparing First
National's financial statements. First National's system of internal accounting
controls is designed to provide reasonable assurance that assets are safeguarded
and that transactions are executed in accordance with management's policies.
This system is augmented by a code of ethics which is monitored and enforced, by
written policies and procedures, and by an independent internal audit staff
which reports to the Audit Committee of the Board of Directors. A description
of the Audit Committee's responsibilities and activities is presented in the
accompanying report of the Audit Committee. Management recognized that because
of cost-benefit considerations and other inherent limitations on the
effectiveness of any internal accounting control system, some errors and other
irregularities may occur. However, management believes that First National's
internal accounting control system provides reasonable assurance that errors or
irregularities that could be material to the financial statements are prevented
or would be detected on a timely basis and corrected in the normal course of
business.
The independent auditors are engaged, in their annual audit function,
to express an opinion on First National's financial statements, which opinion is
to be based on their performance of an audit in accordance with generally
accepted auditing standards.
<TABLE>
<CAPTION>
FIRST NATIONAL BANK AND TRUST COMPANY IN DODGE CITY
SELECTED CONSOLIDATED FINANCIAL DATA
Year Ended December 31,
---------------------------------------------------
1993 1992 1991 1990(1) 1989
-------- -------- -------- -------- --------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Summary income statement information:
Interest income. . . . . . . . . . . . . . . . $ 7,372 $ 8,327 $ 9,710 $ 9,393 $ 9,446
Interest expense . . . . . . . . . . . . . . . 2,565 3,482 5,075 5,046 5,003
Net interest income. . . . . . . . . . . . . . 4,807 4,845 4,635 4,347 4,443
Net interest income (tax equivalent) (2) . . . 4,976 4,931 4,745 4,503 4,643
Provision (benefit) for credit losses. . . . . (122) (145) 120 89 360
Noninterest income . . . . . . . . . . . . . . 1,301 1,094 985 846 673
Noninterest expense. . . . . . . . . . . . . . 3,907 3,483 3,194 3,056 2,762
Net income before cumulative effect of
change in accounting principle. . . . . . . . 1,559 1,672 1,503 1,356 1,347
Cumulative effect of change in
accounting principle. . . . . . . . . . . . . 73 -- -- -- --
Net income . . . . . . . . . . . . . . . . . . 1,632 1,672 1,503 1,356 1,347
Net income applicable to common stock. . . . . 1,632 1,672 1,503 1,356 1,347
Per common share data:
Earnings per common share:
Income before cumulative effect of
change in accounting principle. . . . . . . $ 259.83 $ 278.67 $ 250.50 $ 226.00 $ 224.50
Cumulative effect of change in
accounting principle. . . . . . . . . . . . 12.17 -- -- -- --
Primary. . . . . . . . . . . . . . . . . . . 272.00 278.67 250.50 226.00 224.50
Cash dividend. . . . . . . . . . . . . . . . 255.83 216.67 234.17 210.83 204.17
Book value per common share. . . . . . . . . 1,532.00 1,515.83 1,453.83 1,437.50 1,422.33
Average common shares outstanding (000s) . . 6 6 6 6 6
Year-end common shares outstanding (000s). . 6 6 6 6 6
Earnings performance ratios (3):
Return on assets . . . . . . . . . . . . . . . 1.52% 1.50% 1.34% 1.28% 1.41%
Return on total stocholders' equity. . . . . . 18.19 19.10 17.77 16.01 16.09
Return on common stockholders' equity. . . . . 18.19 19.10 17.77 16.01 16.09
Summary statement of condition information:
Year-end assets. . . . . . . . . . . . . . . . $104,790 $115,020 $122,548 $114,854 $ 97,855
Year-end loans and leases. . . . . . . . . . . 68,265 57,546 61,859 62,760 61,323
Year-end allowance for credit losses . . . . . 889 992 1,020 1,054 1,012
Year-end long-term debt. . . . . . . . . . . . -- -- 138 262 373
Year-end common stockholders' equity . . . . . 9,192 9,095 8,723 8,625 8,534
Year-end stockholders' equity. . . . . . . . . 9,192 9,095 8,723 8,625 8,534
Average assets . . . . . . . . . . . . . . . . 107,429 111,289 112,273 106,008 95,576
Average loans and leases . . . . . . . . . . . 59,927 57,723 60,462 57,205 57,815
Average investment securities. . . . . . . . . 31,265 30,350 26,818 18,985 14,061
Average deposits . . . . . . . . . . . . . . . 90,062 93,035 98,828 96,076 85,338
Average common stockholders' equity. . . . . . 8,970 8,754 8,458 8,469 8,371
Average stockholders' equity . . . . . . . . . 8,970 8,754 8,458 8,469 8,371
Asset quality ratios:
Allowance for credit losses/year-end
loans and leases. . . . . . . . . . . . . . . 1.30% 1.72% 1.65% 1.68% 1.65%
Nonperforming assets/year-end loans plus
other real estate and nonperforming assets. . 0.14 2.03 0.85 0.58 1.58
Allowance for credit losses/year-end
nonperforming loans . . . . . . . . . . . . . 6,838.46 315.92 857.14 287.98 102.53
Net charge-offs/average loans and leases . . . (0.03) (0.20) 0.25 0.08 0.52
Capital ratios:
Stockholders' equity/assets (3). . . . . . . . 8.35% 7.87% 7.53% 7.99% 8.76%
Leverage ratio (4) . . . . . . . . . . . . . . 8.46 8.03 -- -- --
Tier I risk-based capital (5). . . . . . . . . 12.10 13.35 -- -- --
Total risk-based capital(5). . . . . . . . . . 13.28 14.83 -- -- --
Common dividend payout ratio (6) . . . . . . . 94.06 77.75 93.48 93.29 90.94
<FN>
- ----------
(1) During 1990, First National assumed core deposits totaling $13,768,000 in the purchase of Valley Savings.
(2) Stated on a tax-equivalent basis assuming a marginal tax rate of 34%.
(3) Based on averages of the quarter end statement of condition items.
(4) Tier I capital/average assets less certain intangibles.
(5) Tier I capital is composed of common stockholders' equity less certain intangibles. Total capital is Tier I capital
plus the allowance for credit losses (using 1993 regulatory guidelines). Both capital amounts are divided by risk-
weighted assets.
(6) Common dividend per share divided by primary earnings per share.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Performance Summary
- -------------------
Net income for 1993 was $1,632,000 compared to $1,672,000 in 1992
and $1,503,000 in 1991. Earnings per share were $272.00, $278.67, and
$250.50 for 1993, 1992, and 1991, respectively. For 1993 return on
assets and return on common stockholders' equity were 1.52% and 18.19%,
respectively. Return on assets was 1.50% for 1992 and 1.34% for 1991;
return on common stockholders' equity was 19.10% and 17.77% for the
respective prior periods.
Net income for each of the last three years included
extraordinary gains and operating charges for the amortization of core
deposit intangibles. A new accounting standard, Financial Accounting
Standard ("FAS") No. 109 - Accounting for Income Taxes, was implemented
effective January 1, 1993 and resulted in an addition to income of
$73,000 ($12.17 per share).
An operating charge of $54,000 ($9.04 per share) was taken during
1993 to record and amortize core deposit intangibles, associated with
purchase of deposits through the RTC of the local Valley Savings
Association. Both 1992 and 1991 financial results also reflected
operating charges related to the purchase of Valley Savings' deposits.
These operating charges were $54,000 ($9.04 per share) in 1992 and
$63,000 ($10.57 per share) in 1991.
Net interest income in 1993 decreased by $38,000 to total
$4,807,000 for 1993 as compared to $4,845,000 for last year. Total
average interest-earning assets were $97 million for 1993 and 1992.
Comparing 1993 and 1992, average loans increased $2 million, while
average investment securities increased $1 million.
First National actually received a credit for loan losses of
$122,000 and $145,000 in 1993 and 1992, respectively. The provision
reflects net recoveries of loan losses for the year and improved asset
quality in the loan portfolio plus a strong allowance for loan losses.
At December 31, 1993, nonperforming assets were $98,000, down from
$1,190,000 at December 31, 1992. Net recoveries were $19,000 and
$117,000, respectively, in 1993 and 1992. The allowance for credit
losses was $889,000 or 907% of nonperforming assets at December 31,
1993, compared to $992,000 or a ratio of 83.36% for 1992.
Noninterest income was $1,301,000 in 1993, a $207,000 increase
over the 1992 noninterest income of $1,094,000. In 1993, service
charges on deposit accounts increased $60,000; brokerage sales
commissions increased $82,000; and trust fees increased $67,000.
Noninterest expenses increased 12.2% to total $3,907,000 in 1993.
Net income and provision for credit losses between 1992 and 1993
remained unchanged. The increased net income of $169,000 reflected in
a comparison of results of operations for 1992 and 1991 can be
attributed to increased net interest income and a decreased provision
for credit losses. The $210,000 increase in net interest income
between 1992 and 1991 was due to an increased widening of spreads
between the yields on earning assets and the rates paid on interest-
bearing liabilities. The $145,000 benefit for the 1992 provision for
credit losses was $265,000 less than the 1991 provision for credit
losses. The 1991 provision for credit losses was $120,000.
Net Interest Income
- -------------------
For 1993, net interest income amounted to $4,807,000,
representing a decrease of $38,000 or .78% over the $4,845,000 earned
during 1992. On a tax equivalent, net interest income increased .91%
from $4,931,000 in 1992 to total $4,976,000 in 1993. On a fully tax-
equivalent basis, the yield on earning assets increased to 5.11% in
1993 compared to 5.08% in 1992.
Net interest income of $4,931,000 for 1992 represented an
increase of $186,000 over the $4,745,000 earned during 1991. As
interest rates declined during 1992, interest-bearing liabilities
repriced faster than interest-earning assets, causing the spread, on a
fully tax-equivalent basis, to widen to 5.08% in 1992 from 4.72% in
1991.
The following table summarizes the changes in net interest income
on a fully tax-equivalent basis, by major category of interest-earning
assets and interest-bearing liabilities, identifying changes related to
volumes, rates, and changes related to both volumes and rates.
Nonaccrual loans are included in the loan volumes used to calculate the
following analysis of net interest income; however, interest collected
on such loans is usually recorded as a reduction in loans outstanding
and is excluded from interest income.
<TABLE>
<CAPTION>
1993 vs 1992
---------------------------------------------
Change
Total Attributable to
-----------------------------------
Change Volume Yield/Rate Combination
-------- -------- ---------- ------------
(In thousands)
<S> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Loans and leases(1). . . . . . . . . . . . . . . . . $ (126) $ 212 $ (323) $ (15)
Interest-bearing deposits in
other financial institutions. . . . . . . . . . . . (146) (136) (36) 26
Federal funds sold and securities
purchased under agreements to resell. . . . . . . . (36) (10) (27) 1
Taxable investment securities. . . . . . . . . . . . (808) (303) (586) 81
Tax-preferred investment securities(1) . . . . . . . 244 438 (71) (123)
-------- -------- ---------- -----------
Total interest income change . . . . . . . . . . . (872) 201 (1,043) (30)
-------- -------- ---------- -----------
Interest expense:
Savings and interest checking. . . . . . . . . . . . (211) (38) (183) 10
Time deposits. . . . . . . . . . . . . . . . . . . . (616) (159) (495) 38
Federal funds purchased and securities
sold under agreements to repurchase . . . . . . . . (76) (30) (51) 5
Debt . . . . . . . . . . . . . . . . . . . . . . . . (14) (14) (14) 14
-------- -------- ---------- -----------
Total interest expense change. . . . . . . . . . . (917) (241) (743) 67
-------- -------- ---------- -----------
Increase in net interest income (1). . . . . . . . . . 45
Decrease in taxable equivalent adjustment. . . . . . . (83)
--------
Net interest income change . . . . . . . . . . . . . . $ (38)
========
</TABLE>
<TABLE>
<CAPTION>
1992 vs 1991
---------------------------------------------
Change
Total Attributable to
-----------------------------------
Change Volume Yield/Rate Combination
-------- -------- ---------- -----------
(In thousands)
<S> <C> <C> <C> <C>
Increase (decrease) in:
Interest income:
Loans and leases(1). . . . . . . . . . . . . . . . . $ (1,130) $ (303) $ (865) $ 38
Interest-bearing deposits in
other financial institutions. . . . . . . . . . . . (393) (328) (148) 83
Federal funds sold and securities
purchased under agreements to resell. . . . . . . . (92) 22 (106) (8)
Taxable investment securities. . . . . . . . . . . . 279 315 (31) (5)
Tax-preferred investment securities(1) . . . . . . . (71) (35) (40) 4
-------- -------- ---------- ----------
Total interest income change . . . . . . . . . . . (1,407) (329) (1,190) 112
-------- -------- ---------- ----------
Interest expense:
Savings and interest checking. . . . . . . . . . . . (494) 18 (504) (8)
Time deposits. . . . . . . . . . . . . . . . . . . . (1,191) (449) (849) 107
Federal funds purchased and securities
sold under agreements to repurchase . . . . . . . . 105 274 (73) (96)
Debt . . . . . . . . . . . . . . . . . . . . . . . . (13) (14) 2 (1)
-------- -------- ---------- ----------
Total interest expense change. . . . . . . . . . . (1,593) (171) (1,424) 2
-------- -------- ---------- ----------
Increase in net interest income (1). . . . . . . . . . 186
Increase in taxable equivalent adjustment. . . . . . . 24
--------
Net interest income change . . . . . . . . . . . . . . $ 210
========
<FN>
- -------------
(1) Computed on a tax-equivalent basis assuming a marginal tax rate of 34%.
</TABLE>
The following table presents an analysis of average rates and yields on
a fully tax-equivalent basis for 1993, 1992 and 1991.
<TABLE>
<CAPTION>
1993 1992 1991
------------------------- ------------------------- --------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
-------- -------- ------ -------- -------- ------ -------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-Earning Assets:
Loans and leases(2). . . . . . . . . . $ 59,927 $ 5,434 9.07% $ 57,723 $ 5,560 9.63% $ 60,462 $ 6,690 11.06%
Unearned income-loans. . . . . . . . . (19) -- -- (1) -- -- -- -- --
Interest-bearing deposits in other
financial institutions. . . . . . . . 1,036 45 4.34 3,578 191 5.34 8,163 584 7.15
Federal funds sold and securities
purchased under agreements to resell. 5,181 154 2.97 5,484 190 3.46 5,083 282 5.55
Investment securities:
Taxable. . . . . . . . . . . . . . . 23,866 1,411 5.91 27,640 2,219 8.03 23,779 1,940 8.16
Tax-preferred(1) . . . . . . . . . . 7,399 497 6.72 2,710 253 9.34 3,039 324 10.66
-------- -------- -------- -------- -------- --------
Total interest-earning
assets(1) . . . . . . . . . . . . . 97,390 7,541 7.74 97,134 8,413 8.66 100,526 9,820 9.77
-------- -------- --------
Cash and due from banks. . . . . . . . 6,550 7,761 7,384
Bank premises and equipment. . . . . . 1,364 1,178 1,031
Income receivable and other assets . . 2,935 6,051 4,143
Intangible assets, net . . . . . . . . 144 199 257
Allowance for credit losses. . . . . . (954) (1,034) (1,068)
-------- -------- --------
Total assets . . . . . . . . . . . . . . . $107,429 $111,289 $112,273
======== ======== ========
Liabilities And Stockholders' Equity:
Interest-Bearing Liabilities:
Interest-bearing deposits:
Interest checking. . . . . . . . . . $ 24,073 $ 491 2.04% $ 25,667 $ 675 2.63% $ 25,632 $ 1,086 4.24%
Savings. . . . . . . . . . . . . . . 6,076 140 2.30 5,889 167 2.84 5,502 250 4.54
Time under $100,000. . . . . . . . . 33,113 1,360 4.11 37,484 1,926 5.14 41,443 2,811 6.78
Time over $100,000 . . . . . . . . . 9,166 337 3.68 7,907 387 4.89 10,625 693 6.52
-------- -------- -------- -------- -------- --------
Total interest-bearing deposits. . . . 72,428 2,328 3.21 76,947 3,155 4.10 83,202 4,840 5.82
Debt . . . . . . . . . . . . . . . . . -- -- N/A 119 14 11.76 245 27 11.02
Federal funds purchased and agreements
to repurchase . . . . . . . . . . . . . 7,753 237 3.06 8,570 313 3.65 3,696 208 5.63
-------- -------- -------- -------- -------- --------
Total interest-bearing liabilities . . 80,181 2,565 3.20 85,636 3,482 4.07 87,143 5,075 5.82
-------- -------- --------
Noninterest-bearing deposits . . . . . . 17,634 16,088 15,626
Accrued interest, taxes, and
other liabilities . . . . . . . . . . . 644 811 1,046
-------- -------- --------
Total liabilities. . . . . . . . . . . 98,459 102,535 103,815
-------- -------- --------
Preferred stockholders' equity . . . . . -- -- --
Common stockholders' equity. . . . . . . 8,970 8,754 8,458
-------- -------- --------
Total stockholders' equity . . . . . . 8,970 8,754 8 458
-------- -------- --------
Total liabilities and
stockholders' equity. . . . . . . . . . . $107,429 $111,289 $112,273
======== ======== ========
Net interest income. . . . . . . . . . . . $ 4,976 $ 4,931 $ 4,745
======== ======== ========
Rate analysis:
Interest income/interest-earning assets. 7.74% 8.66% 9.77%
Interest expense/interest-earning
assets. . . . . . . . . . . . . . . . . 2.63 3.58 5.05
------ ------ ------
Net yield on earning assets. . . . . . 5.11% 5.08% 4.72%
====== ====== ======
<FN>
- ----------
(1) Income and rates are stated on a tax-equivalent basis assuming a marginal tax rate of 34%.
(2) Nonaccrual loans are included in loans and leases.
</TABLE>
Provision (Benefit) for Credit Losses
- -------------------------------------
The provisions (benefits) for credit losses were $(122,000),
$(145,000), and $120,000 for 1993, 1992, and 1991, respectively. The
benefit for credit losses in 1993 and 1992 reflects the continued
improvement in credit quality as demonstrated by a lower level of
nonperforming loans and lower net charge-offs and the strong allowance
for credit losses. Net recoveries for 1993 totaled $19,000 as compared
to net recoveries of $117,000 for 1992 and net charge-offs of $154,000
for 1991. Nonperforming loans at December 31, 1993 were $13,000, down
from $314,000 at year-end 1992 and $119,000 at year-end 1991. The
allowance for credit losses was $889,000, $992,000, and $1,020,000 at
December 31, 1993, 1992, and 1991, respectively. The ratio of
allowance for credit losses to nonperforming loans increased to
6,838.46% at December 31, 1993, compared with 315.92% at December 31,
1992 and 857.14% at December 31, 1991.
Noninterest Income
- ------------------
Total noninterest income was $1,301,000 for 1993, representing an
increase of $207,000 or 18.92% over the $1,094,000 recorded in 1992.
Included in 1993 noninterest income were $168,000 of investment
securities gains, compared to $181,000 of similar gains realized in
1992.
The most significant changes in noninterest income between 1993
and 1992 occurred in service charges on deposit accounts, brokerage
sales commissions, and trust fees. The $60,000 or 11.0% increase in
service charges was attributable to both consumer and commercial
customers. These increased revenues were due to a reduction in waived
fees and an increase in service charges. The $92,000 or 61.3% increase
in other fees primarily reflects brokerage sales fees for new sales and
products, particularly in the sale of mutual funds. These products are
now available and the low interest rates on deposits continue to make
them more attractive to certain customers as alternative investments to
interest-bearing deposits. Trust fees increased $67,000 to a total of
$268,000 in 1993. The increased fees were principally attributable to
the addition of trust accounts established at the bank.
Total noninterest income was $1,094,000 for 1992, as compared to
$985,000 for 1991.
The following table provides an analysis of noninterest income
segregated between fees collected in the normal course of business and
other revenues for the past three years.
<TABLE>
<CAPTION>
Percent Change
--------------
Year Ended December 31, 1992- 1991-
-----------------------------
1993 1992 1991 1993 1992
-------- -------- -------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Fee income:
Trust fees . . . . . . . . . . . . . . . . . . . . .$ 268 $ 201 $ 219 33.3% (8.2)%
Service charges on deposit accounts. . . . . . . . . 606 546 551 11.0 (0.9)
Other. . . . . . . . . . . . . . . . . . . . . . . . 242 150 153 61.3 (2.0)
-------- -------- --------
Total fee income . . . . . . . . . . . . . . . . . 1,116 897 923 24.4 (2.8)
-------- -------- --------
Other revenues:
Investment securities gains. . . . . . . . . . . . . 168 181 -- (7.2) N/A
Other. . . . . . . . . . . . . . . . . . . . . . . . 17 16 62 6.3 (74.2)
-------- -------- --------
Total other revenues . . . . . . . . . . . . . . . 185 197 62 (6.1) 2.2X
-------- -------- --------
Total noninterest income . . . . . . . . . . . . . . .$ 1,301 $ 1,094 $ 985 18.9 11.1
======== ======== ========
Fee income/average assets. . . . . . . . . . . . . . 1.04% .81% .82%
Noninterest income/average assets. . . . . . . . . . 1.21% .98% .88%
</TABLE>
Noninterest Expense
- --------------------
Noninterest expense amounted to $3,907,000, $3,483,000, and
$3,194,000 for 1993, 1992, and 1991, respectively. Noninterest expense
for each of these years includes certain nonoperating items such as net
costs of operation of other real estate and nonperforming assets.
Net costs of operation of other real estate and nonperforming
assets were $352,000 in 1993, none in 1992, and $29,000 in 1991. The
increased net costs of nonperforming asset properties in 1993 were
principally attributable to write-downs.
Operating expense increased $72,000 or 2.1% to total $3,555,000
for 1993.
Between 1991 and 1992 operating expense increased $318,000 or
10.0%. This increase reflected a $142,000 increase in salary and
employee benefits.
The following table presents an analysis of noninterest expense
for the past three years.
<TABLE>
<CAPTION> Percent Change
--------------
Year Ended December 31, 1992- 1991-
----------------------------
1993 1992 1991 1993 1992
-------- -------- -------- ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits . . . . . . . . . . . .$ 1,955 $ 1,797 $ 1,655 8.8% 8.6%
Net occupancy. . . . . . . . . . . . . . . . . . . . . 331 303 301 9.2 .7
FDIC insurance . . . . . . . . . . . . . . . . . . . . 200 211 204 (5.2) 3.4
Professional fees. . . . . . . . . . . . . . . . . . . 94 149 95 (36.9) 56.8
Advertising. . . . . . . . . . . . . . . . . . . . . . 107 98 115 9.2 (14.8)
Data processing. . . . . . . . . . . . . . . . . . . . 155 150 157 3.3 (4.5)
Supplies and postage . . . . . . . . . . . . . . . . . 94 105 93 (10.5) 12.9
Amortization of core deposit intangible. . . . . . . . 54 54 63 -- (14.3)
Other. . . . . . . . . . . . . . . . . . . . . . . . . 565 616 482 (8.3) 27.8
-------- -------- --------
Total operating expense. . . . . . . . . . . . . . . 3,555 3,483 3,165 2.1 10.0
Net costs of operation of other real estate and
nonperforming assets. . . . . . . . . . . . . . . . . 352 -- 29 N/A (100.0)
-------- -------- --------
Total noninterest expense. . . . . . . . . . . . . .$ 3,907 $ 3,483 $ 3,194 12.2 9.0
======== ======== ========
Noninterest expense/average assets . . . . . . . . . . 3.64% 3.13% 2.84%
Noninterest expense less noninterest
income/average assets . . . . . . . . . . . . . . . . 2.43% 2.15% 1.97%
Operating expense less fee
income/average assets . . . . . . . . . . . . . . . . 2.27% 2.32% 2.00%
Operating expense/fee income plus tax-equivalent
net interest income. . . . . . . . . . . . . . . . . 58.36% 59.76% 55.84%
</TABLE>
Income Taxes
- ------------
Effective January 1, 1993, First National changed its method of
accounting for income taxes from the deferred method to the liability
method required by Financial Accounting Standard ("FAS") No. 109,
"Accounting for Income Taxes". As permitted under the new rules, prior
years' financial statements have not been restated. The cumulative
effect of adopting FAS No. 109 as of January 1, 1993 was to increase
net income by $73,000.
Income tax expense amounted to $764,000, $929,000, and $803,000
for 1993, 1992, and 1991, respectively.
Statements of Condition
- -----------------------
Total assets amounted to $104.8 million, $115.0 million, and
$122.5 million at December 31, 1993, 1992 and 1991, respectively.
Loans
- -----
Period-end loans increased $10.7 million or 18.6% to total $68.3
million at December 31, 1993. Increases were realized in various
commercial and retail categories. The consumer portfolio declined
$618,000 or 12.6%.
Loans to farmers increased $5.1 millon in 1993 which represents
a 19.7% increase and reflects a strong agricultural economy in the
marketplace. Commercial loans increased $4.9 million in 1993 which is
a 52.9% increase over 1992.
Between December 31, 1991 and 1992 total loans decreased $4.3
million representing 7.0% and loans did not materially change between
1990 and 1991. Total loans increased by $1.4 million or 2.3% from
December 31, 1989 to 1990.
The following table shows the composition of loans and leases for
the past five years.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . . . .$ 14,138 $ 9,248 $ 9,639 $ 10,208 $ 11,387
Real estate, less unearned discount:
Construction. . . . . . . . . . . . . . . . . . 478 618 732 681 863
Secured by 1-4 family residences. . . . . . . . 4,691 2,898 4,697 5,765 5,870
Permanent commercial real estate and other. . . 13,141 13,289 12,204 12,985 12,755
Loans to individuals . . . . . . . . . . . . . . . 2,845 3,566 4,135 3,458 4,045
Credit card. . . . . . . . . . . . . . . . . . . . 1,445 1,342 1,213 815 --
Agriculture. . . . . . . . . . . . . . . . . . . . 31,277 26,129 28,680 24,775 25,987
Other . . . . . . . . . . . . . . . . . . . . . . 250 456 559 4,073 416
-------- -------- -------- -------- --------
Total loans and leases . . . . . . . . . . .$ 68,265 $ 57,546 $ 61,859 $ 62,760 $ 61,323
======== ======== ======== ======== ========
</TABLE>
Commercial and Industrial: First National's commercial and
industrial loans generally are made to middle market and small
businesses. There are no highly leveraged transactions.
Agriculture: Loans secured by grain, cattle and farm operating
expenses accounted for the majority of the agriculture portfolio at
December 31, 1993. The remainder of the agriculture portfolio is
secured by equipment and other farm assets.
Real Estate: Most of the construction loans are for 1-4 family
residential construction and development.
The 1-4 family residence portfolio consists of loans secured by
residences located primarily in Dodge City and Southwest Kansas and is
principally permanent first mortgage loans with the remainder
consisting of home equity loans.
Permanent commercial real estate loans include loans in First
National's market for small office buildings/parks; neighborhood strip
shopping centers; small manufacturing machine shop buildings; office
warehouse properties; medical offices; and loans for purposes other
than funding the acquisition of the collateral properties and in which
cash flows from the properties are not the principal source of
repayment. Also included in this portfolio are loans for the financing
of agricultural farm real estate which represent $7.4 million on
December 31, 1993.
Maturity Distribution and Interest Sensitivity of Loans
- -------------------------------------------------------
The maturity distribution of loans outstanding as of December 31,
1993 (excluding credit card, educational, and lease financing) by type
and sensitivity to changes in interest rates are shown in the table
below. The current portion as well as the long-term portion of the
loan is included in the maturity group applying to the loan.
<TABLE>
<CAPTION>
Remaining Maturity
---------------------------------------
Over One
Year Over
One Year Through Five
or Less Five Years Total
--------- -------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Loans with fixed interest rates:
Commercial and industrial. . . . . . . . . . . . . . . . .$ 1,604 $ 4,223 $ 290 $ 6,117
Real estate-construction . . . . . . . . . . . . . . . . . 94 -- 144 238
Real estate-permanent commercial and other . . . . . . . . 1,913 3,726 3,455 9,094
Agriculture. . . . . . . . . . . . . . . . . . . . . . . . 827 4,657 120 5,604
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 34 -- 43
-------- -------- -------- --------
Total loans with fixed interest rates. . . . . . . . . . . .$ 4,447 $ 12,640 $ 4,009 $ 21,096
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Repricing Frequency
---------------------------------------
Less Freq Every
Than Five Years
One Year Every Or More
or Less Five Freq Total
--------- -------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Loans with floating interest rates:
Commercial and industrial. . . . . . . . . . . . . . . . .$ 8,020 $ -- $ -- $ 8,020
Real estate-construction . . . . . . . . . . . . . . . . . 240 -- -- 240
Real estate-permanent commercial and other . . . . . . . . 7,695 169 238 8,102
Agriculture. . . . . . . . . . . . . . . . . . . . . . . . 25,666 -- -- 25,666
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- --
-------- -------- -------- --------
Total loans with floating interest rates . . . . . . . . . .$ 41,621 $ 169 $ 238 $ 42,028
======== ======== ======== ========
</TABLE>
Nonperforming Assets
- --------------------
Nonperforming assets consist of nonaccrual loans, troubled debt
restructurings, and other real estate and nonperforming assets. A loan
is placed on nonaccrual status when principal or interest is due and
has remained unpaid for 90 days or more unless the loan is both well
secured and in the process of collection. A currently performing loan
also may be placed on nonaccrual status when there is reasonable doubt
as to the ability of the borrower to continue to pay principal or
interest. Nonaccrual loans at December 31, 1993 included $13,000 of
these "performing/nonperforming" loans. Other real estate and
nonperforming assets include assets acquired from loan settlements and
foreclosures.
During 1993, banking regulators issued guidance confirming that
the loss recognition on collateral dependent loans should be based on
the fair value of the collateral, but that such loans need not be
reported as "Other real estate" unless possession of the underlying
collateral has been obtained.
Generally, principal and interest payments received on nonaccrual
loans are applied as reductions of principal. For this reason and
because of charge-offs, the book value of such loans understates the
remaining contractual obligation of the borrowers. As of December 31,
1993, the carrying value of nonaccrual loans had been charged down to
39.3% of the customers' contractual principal obligations. Also, the
carrying values of other real estate and nonperforming assets had been
written down to current estimates of their fair values less a reserve
for the estimated costs to sell the properties.
The following table presents nonperforming assets and those loans
which are contractually past due 90 days or more as to principal or
interest payments at December 31 for the past five years.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans . . . . . . . . . . . . . . . . .$ 13 $ 314 $ 119 $ 366 $ 987
Troubled debt restructurings . . . . . . . . . . . -- -- -- -- --
-------- -------- -------- -------- --------
Total nonperforming loans. . . . . . . . . . . . 13 314 119 366 987
Other real estate and nonperforming assets
(including substantive repossessions), net . . . 85 876 408 -- --
-------- -------- -------- -------- --------
Total nonperforming assets . . . . . . . . . . .$ 98 $ 1,190 $ 527 $ 366 $ 987
======== ======== ======== ======== ========
Past due loans (90 days or more) . . . . . . . . .$ 9 $ 109 $ 344 $ 738 $ 892
======== ======== ======== ======== ========
Nonperforming assets/year-end loans plus
other real estate and nonperforming assets. . . . .14% 2.03% .85% .58% 1.58%
Nonperforming assets/year-end assets . . . . . . . .09% 1.03% .43% .32% 1.01%
</TABLE>
Nonperforming assets decreased $1.1 million or 91.8% from December 31,
1992 to total $98,000 at the end of 1993. At December 31, 1993, total
nonperforming assets represented 0.14% of total loans plus other real
estate owned and nonperforming assets and .09% of total assets as
compared to 2.03% and 1.03%, respectively, at December 31, 1992.
Management continues to focus on asset quality. An emphasis is
placed on pro-active management of problem credits, early detection of
potential problems, and timely charge-offs. A separate work-out plan
is developed for the resolution and collection of problem assets. An
analysis of nonperforming loans by type is provided in the following
table. There are no significant concentrations of nonperforming assets
in any one market or industry.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . . . .$ 8 $ 54 $ 116 $ 269 $ 576
Real estate. . . . . . . . . . . . . . . . . . . . -- 260 -- 97 411
Consumer . . . . . . . . . . . . . . . . . . . . . 5 -- 3 -- --
Credit card. . . . . . . . . . . . . . . . . . . . -- -- -- -- --
Lease financing. . . . . . . . . . . . . . . . . . -- -- -- -- --
-------- -------- -------- -------- --------
Total nonperforming loans. . . . . . . . . . . .$ 13 $ 314 $ 119 $ 366 $ 987
======== ======== ======== ======== ========
</TABLE>
Potential Problem Loans
- -----------------------
Certain loans classified for regulatory purposes as doubtful,
substandard, or special mention are included in the nonperforming loan
table.
Allowance for Credit Losses
- ---------------------------
The allowance for credit losses is the amount deemed by
management to be reasonably necessary to provide for possible losses on
loans that may become uncollectible. Additions to the allowance are
charged to expense as the provision for credit losses. Loan losses and
recoveries are charged or credited directly to the allowance. It is
First National's policy to charge off any loan or portion of that loan
when it is deemed to be uncollectible in the ordinary course of
business.
An evaluation of the overall quality of the portfolio is
performed to determine the necessary level of the allowance for credit
losses. This evaluation takes into consideration the classification of
loans and the application of loss estimates to these classifications.
It is the responsibility of management to classify its loans as pass,
special mention, substandard, doubtful, or loss. The classification
criteria are established by the loan discount committee of First
National and are intended to be consistent with the criteria applied by
federal banking system examiners. These classifications take into
consideration all sources of repayment, underlying collateral, the
value of such collateral, and current and anticipated economic
conditions, trends, and uncertainties. First National has an
independent loan review function which periodically reviews the loans
and the classifications.
Loss factors are developed by loan type and classification using
historical loss data and statistical modeling techniques. The
application of these loss factors to the portfolio classifications
combined with analyses of general economic conditions, trends in
portfolio volume, maturity, and composition, and estimates of potential
future losses on specific large loans and those loans requiring special
attention provide management with data essential to identify and
estimate the credit risk inherent in the portfolio. The allowance for
credit losses reflects the result of these estimates, and is deemed to
be adequate at each balance sheet date.
As of December 31, 1993, the allowance for credit losses equaled
$889,000 or 1.30% of total loans and leases and 6,838.46% of
nonperforming loans. Comparatively, the allowance for credit losses
amounted to $992,000 or 1.72% of total loans and 315.92% of
nonperforming loans at December 31, 1992. The level of net recoveries
in 1993 and 1992 and the sound coverage ratio of the allowance for
credit losses to nonperforming loans at December 31, 1993 reflected the
continuing emphasis management is placing on resolving problem loans,
reducing the risk profile of First National, and prudently reserving
for identifiable risks.
The allowance for credit losses has been allocated by loan
category. It should be recognized that such allocations are not
necessarily indicative of future loan losses and that all of such
allowance is available to absorb losses on loans for any category. The
allocation of the allowance for credit losses by loan type is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . . . .$ 182 $ 203 $ 214 $ 231 $ 226
Real estate:
Construction . . . . . . . . . . . . . . . . . . 6 10 12 11 15
Secured by 1-4 family residences . . . . . . . . 61 43 64 76 78
Permanent commercial real estate . . . . . . . . 161 176 153 169 163
Loans to individuals . . . . . . . . . . . . . . . 37 46 52 43 47
Credit cards . . . . . . . . . . . . . . . . . . . 24 26 28 17 --
Agriculture. . . . . . . . . . . . . . . . . . . . 407 471 478 455 467
Other. . . . . . . . . . . . . . . . . . . . . . . 11 17 19 52 16
-------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . .$ 889 $ 992 $ 1,020 $ 1,054 $ 1,012
======== ======== ======== ======== ========
</TABLE>
The following table compares the allocation of the allowance for
credit losses by loan type expressed as a percentage of the total
allowance for credit losses to the percentage of loans in each loan
type to total loans:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Commercial and industrial. . . . . . . . . . . . . 20.5% 20.5% 21.0% 21.9% 22.3%
Real estate:
Construction . . . . . . . . . . . . . . . . . . .7 1.0 1.2 1.1 1.5
Secured by 1-4 family residences . . . . . . . . 6.9 4.4 6.3 7.2 7.7
Permanent commercial real estate . . . . . . . . 18.1 17.7 15.0 16.0 16.1
Loans to individuals . . . . . . . . . . . . . . . 4.1 4.6 5.1 4.1 4.7
Credit cards . . . . . . . . . . . . . . . . . . . 2.7 2.6 2.7 1.6 --
Agriculture. . . . . . . . . . . . . . . . . . . . 45.8 47.5 46.8 43.2 46.1
Other. . . . . . . . . . . . . . . . . . . . . . . 1.2 1.7 1.9 4.9 1.6
-------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ========
</TABLE>
The following table summarizes the changes in the allowance for credit
losses for the past five years and presents selected related ratios.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1993 1992 1991 1990 1989
--------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, as previously reported . $ 992 $ 1,020 $ 1,054 $ 1,012 $ 950
--------- -------- -------- -------- --------
Charge-offs:
Commercial and industrial. . . . . . . . . . 13 161 167 54 199
Real estate. . . . . . . . . . . . . . . . . -- 27 -- -- 115
Consumer . . . . . . . . . . . . . . . . . . 3 3 4 1 8
Credit card. . . . . . . . . . . . . . . . . 15 21 2 -- --
Lease financing. . . . . . . . . . . . . . . -- -- -- -- --
Other. . . . . . . . . . . . . . . . . . . . -- -- -- -- --
--------- -------- -------- -------- --------
Total charge-offs. . . . . . . . . . . . . 31 212 173 55 322
--------- -------- -------- -------- --------
Recoveries:
Commercial and industrial. . . . . . . . . . 28 328 18 6 10
Real estate. . . . . . . . . . . . . . . . . 19 -- -- -- 10
Consumer . . . . . . . . . . . . . . . . . . 2 1 1 2 4
Credit card. . . . . . . . . . . . . . . . . 1 -- -- -- --
Lease financing. . . . . . . . . . . . . . . -- -- -- -- --
Other. . . . . . . . . . . . . . . . . . . . -- -- -- -- --
--------- -------- -------- -------- --------
Total recoveries . . . . . . . . . . . . . 50 329 19 8 24
--------- -------- -------- -------- --------
Net loans and leases (recoveries) charge-offs. (19) (117) 154 47 298
Provision (benefit) for credit losses. . . . . (122) (145) 120 89 360
--------- -------- -------- -------- --------
Balance at December 31 . . . . . . . . . . . . $ 889 $ 992 $ 1,020 $ 1,054 $ 1,012
========= ======== ======== ======== ========
Loans and leases at year end . . . . . . . . . $ 68,265 $ 57,546 $ 61,859 $ 62,760 $ 61,323
Average loans and leases . . . . . . . . . . . $ 59,927 $ 57,723 $ 60,462 $ 57,205 $ 57,815
Net charge-offs/average loans and leases . . . (.03)% (.20)% .25% .08% .52%
Allowance for credit losses/net charge-offs. . (4,678.95)% (847.86)% 662.34% 2,242.55% 339.60%
Allowance for credit losses/year end
nonperforming loans . . . . . . . . . . . . . 6,838.46% 315.92% 857.14% 287.98% 102.53%
Allowance for credit losses/year end
nonperforming assets. . . . . . . . . . . . . 907.14% 83.36% 193.55% 287.98% 102.53%
Allowance for credit losses/year end
loans and leases. . . . . . . . . . . . . . . 1.30% 1.72% 1.65% 1.68% 1.65%
</TABLE>
Investment Portfolio
- --------------------
The year-end book value of investment securities at December 31
for each of the last three years is presented in the table below.
Held-to-maturity
<TABLE>
<CAPTION>
December 31,
----------------------------
1993 1992 1991
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
U.S. Treasury obligations. . . . . . . . . . . . . . . . . . . . . . .$ 6,998 $ 11,006 $ 6,313
Obligations of U.S. Government agencies
and corporations:
Mortgage-backed. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,001 6,186 6,079
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,900 13,341 11,553
Obligations of state and political subdivisions. . . . . . . . . . . . 9,102 4,049 2,425
Other securities:
Privately issued collateralized mortgage obligations . . . . . . . . 217 314 --
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 550 551
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 22,266 $ 35,446 $ 26,921
======== ======== ========
Market value in excess of book value . . . . . . . . . . . . . . . . .$ 260 $ 581 $ 934
======== ======== ========
</TABLE>
Effective for the first quarter of 1994, First National adopted
a policy of classifying all United States Treasury securities and
obligations of United States government corporations and agencies with
maturities of five years or less as "available for sale" in accordance
with the guidelines of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities".
Investment securities decreased $13.2 million between December
31, 1993 and 1992. The decrease is attributable to First National
becoming more fully invested through lending opportunities in 1993.
Excluding U.S. Treasury obligations and obligations of U.S.
government agencies and corporations, there were no security holdings
of any one issuer at December 31, 1993 that exceeded 10% of
consolidated stockholders' equity.
The tables below summarize the maturity and yield distribution of
investment securities at December 31, 1993.
<TABLE>
<CAPTION>
Maturing
------------------------------------------------------------------------------------------
After one After five
Within but within but within After
one year five years ten years ten years Total
--------------- --------------- --------------- --------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury obligations. . . . . .$ 3,001 5.25% $ 3,997 5.81% $ -- --% $ -- --% $ 6,998 5.56%
Obligations of U.S. Government
agencies and corporations:
Mortgage-backed. . . . . . . . . . -- -- -- -- 1,894 6.42 107 8.67 2,001 6.54
Other. . . . . . . . . . . . . . . 1,900 8.28 2,000 6.59 -- -- -- -- 3,900 7.41
Obligations of states and
political subdivisions. . . . . . . 450 4.25 7,334 4.14 1,318 4.51 -- -- 9,102 4.20
Privately issued collateralized
mortgage obligations. . . . . . . . -- -- -- -- -- -- 217 7.05 217 7.05
Other securities . . . . . . . . . . -- -- -- -- -- -- 48 6.00 48 6.00
-------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . .$ 5,351 6.24 $ 13,331 5.00 $ 3,212 5.63 $ 372 7.38 $ 22,266 5.43
======== ======== ======== ======== ========
</TABLE>
Scheduled principal reductions and prepayments on the mortgage-backed
securities approximated $1,483,000 during the fourth quarter of 1993. The
volume of principal reductions and prepayments combined with First National's
strong liquidity position (which is described in the Asset and Liability
Management Section) demonstrates First National's ability to hold a substantial
portion of its investment securities to maturity.
Deposits
- --------
Average total deposits decreased $30 million or 3.20% between
December 31, 1993 and 1992. At December 31, 1993, deposits totaled
$89.6 million which compares to $97.5 million deposits at December 31, 1992.
Certain customers have reinvested maturing deposits in alternative investment
instruments and some of these customers have purchased mutual funds
and other investments through the investment company, resulting in increased
fee income. Core deposits (demand, interest checking, savings, and time
deposits under $100,000) represented 90.13% of total deposits at
December 31, 1993 compared to 90.14% at December 31, 1992.
The following table provides a breakdown of average deposits and average
rates paid,by type, for the past three years.
<TABLE>
<CAPTION>
1993 1992 1991
------------------ ------------------ -------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
-------- -------- -------- -------- -------- --------
(Dollars in,000s)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits . . . . . .$ 17,634 --% $ 16,088 --% $ 15,626 --%
-------- -------- --------
Interest-bearing deposits:
Interest-bearing checking deposits . . 24,073 2.039 25,667 2.631 25,632 4.234
Savings deposits . . . . . . . . . . . 6,076 2.304 5,889 2.839 5,502 4.544
Time deposits under $100,000 . . . . . 33,113 4.106 37,484 5.136 41,443 5.724
Time deposits of $100,000 or more. . . 9,166 3.675 7,907 4.894 10,625 6.517
-------- -------- --------
Total interest-bearing deposits. . . 72,428 3.214 76,947 4.100 83,202 5.816
-------- -------- --------
Total deposits . . . . . . . . . . .$ 90,062 $ 93,035 $ 98,828
======== ======== ========
</TABLE>
The following table sets forth, by time remaining to maturity,
certificates and other time deposits of $100,000 or more (including
individual retirement accounts of $1,089,000):
<TABLE>
<CAPTION>
December 31,
1993
--------------
(In thousands)
<S> <C>
Under three months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 5,173
Over three months through twelve months. . . . . . . . . . . . . . . . . . . . . . . . . 3,262
Over one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402
Over five years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --
--------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 8,837
==============
</TABLE>
Brokerage deposits were immaterial at December 31, 1993.
Short-term Borrowings
- ---------------------
Short-term borrowings consist of securities sold under agreements
to repurchase and notes payable. Amounts and interest rates related
to short-term borrowings for the last three years were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Securities sold under agreements to repurchase:
Outstanding at year-end. . . . . . . . . . . . . . . . . . . . . . .$ 5,307 $ 7,769 $ 14,525
Average interest rate at year-end. . . . . . . . . . . . . . . . . . 3.12% 3.43% 4.32%
Average outstanding at quarter-end during the year . . . . . . . . .$ 7,753 $ 8,570 $ 3,696
Weighted average interest rate . . . . . . . . . . . . . . . . . . . 3.06% 3.66% 5.62%
Highest outstanding balance at any quarter-end . . . . . . . . . . .$ 7,673 $ 9,514 $ 14,525
Notes payable:
Outstanding at year-end. . . . . . . . . . . . . . . . . . . . . . .$ -- $ -- $ 138
Average interest rate at year-end. . . . . . . . . . . . . . . . . . N/A N/A 11.08%
Average outstanding at quarter-end during the year . . . . . . . . .$ -- $ 119 $ 245
Weighted average interest rate . . . . . . . . . . . . . . . . . . . N/A 11.08% 11.08%
Highest outstanding balance at any quarter-end . . . . . . . . . . .$ -- $ 138 $ 261
</TABLE>
Asset and Liability Management
- ------------------------------
Interest Rate Risk: First National manages its assets and
liabilities to control the exposure of its net interest income and
capital to risks associated with interest rate changes and to achieve
consistent growth in net interest income. Interest rate risk is
evaluated using various tools, including interest sensitivity gap and
simulation analysis.
Interest-bearing checking and savings deposits are not classified
as "rate sensitive" liabilities as per a resolution of the Board of
Directors.
The following table presents First National's interest
sensitivity gap position as of December 31, 1993. This table depicts
the timing of the contractual maturity or repricing of most assets and
liabilities at this date. Fixed-rate mortgage-backed securities are
included in repricing-maturity categories based upon estimated of
prepayments provided by a third-party market information service.
These estimates may vary depending upon both the volatility and the
level of market interest rates in relationship to the coupon rates of
the underlying mortgages. For purposes of this table, interest-bearing
checking and savings deposits are included in the under-three-month
category. This table does not indicate the effect the repricing of
assets and liabilities would have on net interest income. Also, it
does not reflect interest rate exposures, such as basis risk,
prepayment risk, intra-period sensitivity, and the effect of interest
rate floors and ceilings associated with certain financial instruments.
<TABLE>
<CAPTION>
Three Six
Under Through Through Over Not
Three Six Twelve One Rate
Months Months Months Year Sensitive Total
-------- -------- -------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans and leases . . . . . . . . . . .$ 37,845 $ 3,329 $ 5,131 $ 21,960 $ -- $ 68,265
Investment securities. . . . . . . . . 3,546 132 3,205 15,383 -- 22,266
Other earning assets . . . . . . . . . 5,593 -- -- -- -- 5,593
Nonearning assets. . . . . . . . . . . -- -- -- -- 8,666 8,666
-------- -------- -------- -------- --------- --------
Total assets . . . . . . . . . . . . . .$ 46,984 $ 3,461 $ 8,336 $ 37,343 $ 8,666 $104,790
======== ======== ======== ======== ========= ========
Liabilities and stockholders' equity:
Deposits . . . . . . . . . . . . . . .$ 45,390 $ 8,015 $ 8,279 $ 7,070 $ 20,933 $ 89,687
Short-term borrowings. . . . . . . . . 5,307 -- -- -- -- 5,307
Other liabilities. . . . . . . . . . . -- -- -- -- 604 604
Stockholders' equity . . . . . . . . . -- -- -- -- 9,192 9,192
-------- -------- -------- -------- --------- --------
Total liabilities and stockholders'
equity. . . . . . . . . . . . . . . . .$ 50,697 $ 8,015 $ 8,279 $ 7,070 $ 30,729 $104,790
======== ======== ======== ======== ========= ========
Repricing gap. . . . . . . . . . . . . .$ (3,713) $ (4,554) $ 57 $ 30,273 $ (22,063) $ --
Cumulative repricing gap . . . . . . . .$ (3,713) $ (8,267) $ (8,210) $ 22,063 $ --) $ --
Cumulative rate-sensitive
assets/rate-sensitive liabilities . . . .93 .86 .88 (*) (*)
<FN>
- ----------
(*) Not meaningful.
</TABLE>
First National has a negative cumulative repricing gap in the
one-year horizon. Consequently, it is more sensitive to a rising rate
environment which, if it occurred, would adversely impact the net
interest margin. Simulation modeling has demonstrated that a sudden
and large increase in rates or a dramatic narrowing in the spread
between asset yields and liability costs would result in an adverse
impact on the net interest margin; however, the adverse impact is more
moderate if interest rates increase gradually.
The repricing gap in the one year horizon is .88:1 resulting in
a negative cumulative repricing gap. Consequently, it is more
sensitive to a rising rate environment, which, if it occurred, would
adversely impact the net interest margin.
The repricing gap in the 12 month to 24 month category is 5.52:1
Liquidity: First National's consolidated statements of cash
flows are presented elsewhere in this report. These statements
distinguish cash flows as operating, investing, and financing. They
provide a historical accounting of First National's ability to generate
cash required to meet its customers' and creditors' demands. Certain
statement-of-condition items and ratios are indicative of First
National's strong liquidity position at December 31, 1993. The loans-
to-deposits and loans-to-assets ratios averaged 67.34% and 56.54%,
respectively, during 1993. During 1993, average core deposits (demand,
interest checking, savings, and time deposits under $100,000)
represented 89.9% of total deposits and 75.4% of average assets.
At December 31, 1993, securities sold under agreements to
repurchase and other borrowings totaled $5.3 million. At that same
date, additional borrowing liquidity was also available in the form of
$10.8 million of unpledged investment securities which could secure
short-term borrowing requirements. Regular maturities and prepayments
of investment securities, particularly the mortgage-backed securities,
also generate significant liquidity. Scheduled principal reductions
and prepayments on the mortgage-backed securities approximated $1.4
million during the fourth quarter of 1993.
First National had commitments to extend credit at December 31,
1993, including standby letters of credit of $.4 million, unused credit
card lines of $3.8 million, and other loan commitments of $18.1
million. Some of these commitments will not be fully utilized, others
will expire without being drawn upon, and the commitments will not all
be used at the same time. Accordingly, management anticipates that
First National has ample liquidity to meet these and other demands.
Capital Resources
- -----------------
At December 31, 1993, total stockholders' equity was $9.1 million
or 8.77% of total assets compared to $9.0 million or 7.91% of total
assets at December 31, 1992. For 1993, total stockholders' equity
averaged $8.9 million or 8.35% of average assets. The prior year
average equity was $8.7 million or 7.87% of average assets.
Banking system regulators apply two measures of capital adequacy
to banking companies: the risk-based capital and leverage ratios. The
risk-based capital rules provide for the weighting of assets and
off-balance-sheet commitments and contingencies according to prescribed
risk categories ranging from 0 to 100%. Regulatory capital is then
divided by risk-weighted assets to determine the risk-adjusted capital
ratios. The leverage ratio supplements the risk-based capital
guidelines by placing a constraint on the degree to which a banking
company can leverage its equity capital, regardless of the balance
sheet composition. The leverage ratio is computed by dividing Tier I
capital by quarter-to-date average assets less certain intangibles.
The following table presents First National's risk-based capital
and leverage ratios together with the required minimums.
<TABLE>
<CAPTION>
December 31,
------------------
1993 1992
-------- --------
(In thousands)
<S> <C> <C>
Tier I capital:
Common stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . .$ 9,192 $ 9,095
Preferred stockholders' equity less intangible assets. . . . . . . . . . . . . 116 170
-------- --------
Total Tier I capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,076 8,925
Tier II capital:
Allowance for credit losses (1). . . . . . . . . . . . . . . . . . . . . . . . 889 992
-------- --------
Total capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 9,965 $ 9,917
======== ========
Risk weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 75,023 $ 66,860
======== ========
Adjusted average assets (2). . . . . . . . . . . . . . . . . . . . . . . . . . .$107,313 $111,119
======== ========
</TABLE>
<TABLE>
<CAPTION>
Regulatory
minimums
----------
<S> <C> <C> <C>
Risk-based capital ratios:
Tier I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.00% 12.10% 13.35%
Tier II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.00 13.28 14.83
Leverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.00 8.46 8.03
<FN>
- ----------
(1) Limited to 1.50% risk weighted assets.
(2) Quarterly average assets less intangibles.
</TABLE>
As indicated in the preceding table, First National's risk-based and
leverage capital ratios substantially exceed the minimums required by
banking system regulators.
The Federal Deposit Insurance Corporation adopted final
regulations under the Federal Deposit Insurance Corporation Improvement
Act, effective June 16, 1992. A bank is typically defined to be "well
capitalized" if it maintains a Tier I capital ratio of at least 6.0%,
a total risk-based capital ratio of at least 10.0% and a leverage
ratio of at least 5.0%. Generally, it is First National's intention to
maintain sufficient capital in each of its bank subsidiaries to permit
them to maintain a "well capitalized" designation. The capital ratios
for First National exceeded the "well capitalized" regulatory capital
requirements at December 31, 1993.
Recently Issued Accounting Standards
- ------------------------------------
In May 1993, the Financial Accounting Standards Board issued
Financial Accounting Standard ("FAS") No. 114 which could have an
effect on First National in 1994 and after. FAS No. 114 addresses the
accounting by creditors for impairment of certain loans. It is
applicable to all creditors and to all loans, uncollateralized as well
as collateralized, except large groups of smaller-balance homogeneous
loans that are collectively evaluated for impairment, loans that are
measured at fair value or at the lower of cost or fair value, leases,
and debt securities. It applies to all loans that are restructured in
a troubled debt restructuring involving a modification of terms. The
Statement requires that, when evaluating the need for an allowance for
credit losses on impaired loans that are within the scope of this
Statement, the loss accrual be measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market
price or the fair value of the collateral if the loan is collateral-
dependent. This Statement is effective for fiscal years beginning
after December 15, 1994. First National has not completed the analyses
required to estimate the impact of FAS 114; however, First National
does not believe the adoption of the new rules will have an adverse
effect on its financial condition.
Effects of Inflation and Changing Prices
- ----------------------------------------
Virtually all assets and liabilities of a banking organization
are monetary in nature. As such, they represent obligations to pay or
receive fixed and determinable amounts of money which are not affected
by future changes in prices. Changes in interest rates are the
greatest determinant of bank earnings. However, interest rates do not
necessarily move in the same direction or with the same magnitude as
prices of other goods and services. A financial institution can
respond to changes in interest rates by matching the maturities and
costs of its liabilities against its interest earning assets. How well
the institution copes with changing interest rates may then be
determined by examining its net yield on earning assets and analyzing
its asset and liability structure. Accordingly, reference to the
various supplementary schedules shown elsewhere in this report will
assist in the understanding of how First National is positioned to
react to changing interest rates and inflationary trends.
Quarterly Financial Data (Unaudited)
- ------------------------------------
<TABLE>
<CAPTION>
1993
----------------------------------------
4th 3rd 2nd 1st
--------- --------- --------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Summary Income Statement Information:
Interest income. . . . . . . . . . . . . . . . . . . . . .$ 1,814 $ 1,859 $ 1,833 $ 1,866
Interest expense . . . . . . . . . . . . . . . . . . . . . 586 630 645 704
-------- -------- -------- --------
Net interest income. . . . . . . . . . . . . . . . . . . . 1,228 1,229 1,188 1,162
Provision (benefit) for credit losses. . . . . . . . . . . 98 (220) -- --
-------- -------- -------- --------
Net interest income after provision (benefit) for
credit losses . . . . . . . . . . . . . . . . . . . . . . 1,130 1,449 1,188 1,162
Investment securities gains. . . . . . . . . . . . . . . . 93 -- 75 --
Other noninterest income . . . . . . . . . . . . . . . . . 303 261 319 250
Noninterest expense. . . . . . . . . . . . . . . . . . . . (822) (1,183) (954) (948)
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . . . . . 704 527 628 464
Income tax expense . . . . . . . . . . . . . . . . . . . . 252 162 190 160
-------- -------- -------- --------
Net income before cumulative effect
of a change in accounting principle . . . . . . . . . . . 452 365 438 304
Cumulative effect of a change in accounting principle. . . -- -- -- 73
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . .$ 452 $ 365 $ 438 $ 377
======== ======== ======== ========
Net income applicable to common stock. . . . . . . . . .$ 452 $ 365 $ 438 $ 377
======== ======== ======== ========
Per Common Share Data:
Earnings per common share:
Income before cumulative effect. . . . . . . . . . . . .$ 75.33 $ 60.83 $ 73.00 $ 50.67
Cumulative effect of a change in accounting principle. . -- -- -- 12.17
-------- -------- -------- --------
Net income per share . . . . . . . . . . . . . . . . . .$ 75.33 $ 60.83 $ 73.00 $ 62.84
======== ======== ======== ========
Common dividends . . . . . . . . . . . . . . . . . . . .$ 60.00 $ 70.83 $ 62.50 $ 62.50
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1992
----------------------------------------
4th 3rd 2nd 1st
--------- --------- --------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Summary Income Statement Information:
Interest income. . . . . . . . . . . . . . . . . . . . . .$ 1,949 $ 2,040 $ 2,100 $ 2,239
Interest expense . . . . . . . . . . . . . . . . . . . . . 745 817 903 1,018
-------- -------- -------- --------
Net interest income. . . . . . . . . . . . . . . . . . . . 1,204 1,223 1,197 1,221
Provision (benefit) for credit losses. . . . . . . . . . . 45 45 20 (255)
-------- -------- -------- --------
Net interest income after provision (benefit) for
credit losses . . . . . . . . . . . . . . . . . . . . . . 1,159 1,178 1,177 1,476
Investment securities gains. . . . . . . . . . . . . . . . 2 179 -- --
Other noninterest income . . . . . . . . . . . . . . . . . 249 226 234 204
Noninterest expense. . . . . . . . . . . . . . . . . . . . (806) (932) (900) (845)
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . . . . . 604 651 511 835
Income tax expense . . . . . . . . . . . . . . . . . . . . 214 239 178 298
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . .$ 390 $ 412 $ 333 $ 537
======== ======== ======== ========
Net income applicable to common stock. . . . . . . . . .$ 390 $ 412 $ 333 $ 537
======== ======== ======== ========
Per Common Share Data:
Net income per share . . . . . . . . . . . . . . . . . .$ 65.00 $ 68.67 $ 55.50 $ 89.50
======== ======== ======== ========
Common dividends . . . . . . . . . . . . . . . . . . . .$ 50.00 $ 54.17 $ 54.17 $ 58.33
======== ======== ======== ========
</TABLE>
FOURTH FINANCIAL CORPORATION,
FIRST DODGE CITY BANCSHARES, INC.,
EMPRISE BANK, NATIONAL ASSOCIATION, EQUITY BANK FOR SAVINGS,F.A.,
AND GREAT SOUTHERN BANCORP, INC. (Pending Acquisitions)
The following unaudited pro forma condensed consolidated statement
of condition as of December 31, 1993 combines (1) the amounts shown in
the historical consolidated statement of condition of Fourth Financial
and (2) the amounts shown in the historical consolidated statement of
condition of First Dodge, all as of December 31, 1993, as reflected in
the unaudited pro forma condensed consolidated statement of condition
(see "Pro Forma Financial Statements") with (3) the historical
statements of condition of the following companies, all as of
December 31, 1993:
Emprise Bank, National Association ("Emprise")* Purchase Transaction
Equity Bank for Savings, F.A. ("Equity")* Purchase Transaction
Great Southern Bancorp, Inc. ("GSB") Pooling Transaction
-----------------
* Financial statements are not presented separately herein.
The pro forma condensed consolidated statement of condition is not
necessarily indicative of the combined financial position as it may be
in the future or as it might have been had the acquisitions been
consummated on December 31, 1993. The following notes describe the
assumptions used in this pro forma condensed consolidated statement of
condition. The pro forma condensed consolidated statement of condition
should be read in conjunction with the other pro forma and historical
financial statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CONDITION
December 31, 1993
(Unaudited)
(Dollars in thousands, except per share amounts)
Combined
Pro Forma Combined
Fourth Financial Emprise Pro Forma
and and -------------------------
First Dodge Equity Adj. Combined
---------------- --------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks.............$ 320,572 $ 24,362 $ (534)A $ 344,400
Interest-bearing deposits
in other financial institutions... 3,025 - - 3,025
Investment securities............... 2,962,638 274,050 (145)D 3,236,543
Trading account securities.......... 474 - - 474
Federal funds sold and
securities purchased under
agreements to resell.............. 4,913 5,000 11,166 B 33,888
131,702 C
(118,893)D
Loans and leases.................... 3,352,079 365,395 (11,000)B 3,684,990
(33,570)C
12,086 D
Allowance for credit losses......... (67,617) (7,397) - (75,014)
--------------- --------- ---------- -----------
Net loans and leases............ 3,284,462 357,998 (32,484) 3,609,976
Bank premises and
equipment....................... 145,664 15,620 - 161,284
Income receivable and
other assets...................... 97,267 93,306 (166)B 120,377
(86,030)C
16,000 D
Intangible assets, net.............. 67,286 18,175 1,004 D 96,968
9,300 D
1,203 D
--------------- --------- ---------- -----------
Total assets.................$ 6,886,301 $ 788,511 $ (67,877) $ 7,606,935
=============== ========= ========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Deposits............................$ 5,436,784 $ 578,181 $ (534)A $ 6,027,653
12,676 C
546 D
Other borrowings.................... 769,936 126,396 (25)C 896,307
Accrued interest, taxes, and
other liabilities................. 56,652 3,943 (549)C 60,046
Long-term debt...................... 13,989 - - 13,989
--------------- --------- ---------- -----------
Total liabilities........... 6,277,361 708,520 12,114 6,997,995
--------------- --------- ---------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock..................... 100,000 - - 100,000
Common stock........................ 135,829 5,001 (5,001)D 135,829
Capital surplus..................... 106,101 61,620 (61,620)D 106,101
Retained earnings................... 244,810 13,370 (13,370)D 244,810
Less: Stock option loans and
ESOP loans..................... (1,795) - - (1,795)
Less: Treasury stock................ (1,153) - - (1,153)
Unrealized gains on
available-for-sale securties.. 25,148 - - 25,148
--------------- --------- ---------- -----------
Total stockholders' equity... 608,940 79,991 (79,991) 608,940
--------------- --------- ---------- -----------
Total liabilities and
stockholders' equity..$ 6,886,301 $ 788,511 $ (67,877) $ 7,606,935
=============== ========= ========== ===========
Book value per share
of common stock.................. $18.76 $18.76
=============== ==========
Risk-based capital ratios:
Tier I (regulatory minimum 4%).... 13.47 % 11.75%
Total (regulatory minimum 8%)..... 14.72 13.00
Leverage capital ratio (regulatory
minimum 3%)...................... 7.92 6.87
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CONDITION
December 31, 1993
(Unaudited)
(Dollars in thousands, except per share amounts)
Pro Forma
------------------------
GSB Adj. Combined
----------- ---------- ------------
<S> <C> <C> <C>
ASSETS:
Cash and due from banks.............$ 4,001 $ (44)E $ 348,357
Interest-bearing deposits
in other financial institutions.... 10,895 - 13,920
Investment securities................ 53,928 - 3,290,471
Trading account securities........... - - 474
Federal funds sold and
securities purchased under
agreements to resell............... - 904 F 34,792
Loans and leases..................... 447,756 - 4,132,746
Allowance for credit losses.......... (13,364) - (88,378)
---------- --------- -----------
Net loans and leases............. 434,392 - 4,044,368
Bank premises and
equipment........................ 6,339 - 167,623
Income receivable and
other assets....................... 19,821 - 140,198
Intangible assets, net............... 1,314 - 98,282
---------- --------- -----------
Total assets.................$ 530,690 $ 860 $ 8,138,485
========== ========= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Deposits............................$ 327,424 $ (44)E $ 6,355,033
Other borrowings..................... 139,906 - 1,036,213
Accrued interest, taxes, and
other liabilities.................. 4,681 - 64,727
Long-term debt....................... - - 13,989
---------- --------- -----------
Total liabilities............ 472,011 (44) 7,469,962
---------- --------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock...................... - - 100,000
Common stock......................... 21 1 F 149,823
13,972 G
Capital surplus...................... 16,569 903 F 102,449
(21,124)G
Retained earnings.................... 49,272 - 294,082
Less: Stock option loans and
ESOP loans...................... (31) - (1,826)
Less: Treasury stock................. (7,152) 7,152 G (1,153)
Unrealized gains on
available-for-sale securties... - - 25,148
---------- --------- -----------
Total stockholders' equity... 58,679 904 668,523
---------- --------- -----------
Total liabilities and
stockholders' equity..$ 530,690 $ 860 $ 8,138,485
========== ========= ===========
Book value per share
of common stock....................................... $19.00
===========
Risk-based capital ratios:
Tier I (regulatory minimum 4%)................. 12.04 %
Total (regulatory minimum 8%)................... 13.29
Leverage capital ratio (regulatory
minimum 3%).............................................. 7.14
</TABLE>
Pro forma adjustments and notes to the condensed consolidated statement
of condition are as follows (dollars in thousands):
<TABLE>
<CAPTION>
<S> <C>
(A) To eliminate intercompany balances:
Cash and due from banks/deposits. . . . . . . . . . . . . . . 534
(B) To record the sale of non-banking assets, net of liabilities, of
Equity to LSB Industries, Inc., its parent, at book value:
Loans and leases. . . . . . . . . . . . . . . . . . . . . . . 33,570
Income receivable and other assets. . . . . . . . . . . . . . 86,030
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . 12,676
Other borrowings. . . . . . . . . . . . . . . . . . . . . . . 25
Accrued interest, taxes, and other liabilities. . . . . . . . 549
(C) To record the purchase of Emprise and Equity, eliminate equity
accounts, and reflect the purchase method of accounting:
Investment securities . . . . . . . . . . . . . . . . . . . . 145
Loans and lease financing . . . . . . . . . . . . . . . . . . 12,086
Income receivable and other assets
(deferred tax asset) . . . . . . . . . . . . . . . . . . . . 16,000
Intangible assets (purchased mortgage
servicing rights). . . . . . . . . . . . . . . . . . . . . . 1,004
Intangible assets (purchased credit
card relationships). . . . . . . . . . . . . . . . . . . . . 9,300
Intangible assets (cost in excess of
net assets acquired) . . . . . . . . . . . . . . . . . . . . 1,203
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . 546
<FN>
The purchase price has been allocated to the identifiable assets and liabilities
acquired based upon the estimate of their fair values with the excess allocated to cost
in excess of net assets acquired. As required by Statement of Financial Accounting
Standard No. 109 "Accounting for Income Taxes," deferred taxes have been recorded
for the difference between the tax basis and book basis of the net assets at an
effective rate of 39%.
Cost in excess of net assets acquired is being amortized using the straight-line method
over 20 years.
(D) To record the repayment of Emprise's parent's loan from Bank IV Kansas from the
proceeds
of the sale of Emprise.
(E) To eliminate intercompany balances:
Cash and due from banks/deposits. . . . . . . . . . . . . . . 44
(F) To record the exercise of options for 94,125 of GSB shares pursuant to
GSB's 1989 Stock Option and Incentive Plan.
(G) To retire GSB's 441,074 shares of treasury stock and to record the issuance of
2,798,813 shares of Fourth Financial stock in exchange for the 1,707,218
shares of GSB stock estimated to be outstanding at consummation.
This transaction is to be accounted for as a pooling of interest.
</TABLE>
Pro forma book value per share of common stock is based on the
26,463,733 issued and outstanding shares of common stock of Fourth
Financial at December 31, 1993, the 662,220 shares anticipated to be
issued in the pending First Dodge acquisition, and the 2,798,813 shares
anticipated to be issued in the pending GSB acquisition.
FOURTH FINANCIAL CORPORATION,
FIRST DODGE CITY BANCSHARES, INC.,
EMPRISE BANK, NATIONAL ASSOCIATION, EQUITY BANK FOR SAVINGS,
F.A.,
AND GREAT SOUTHERN BANCORP, INC. (Pending Acquisitions)
The following unaudited pro forma condensed consolidated
statements of income for the years ended December 31, 1993, 1992, and
1991 combine (1) the amounts shown in the historical consolidated
statements of income of Fourth Financial and (2) the amounts shown in
the historical consolidated statements of income of First Dodge, as
reflected in the unaudited pro forma condensed consolidated statements
of income (see "Pro Forma Financial Statements") with (3) the amounts
shown in the historical statements of income of the following
companies:
Emprise Bank, National Association ("Emprise")* Purchase Transaction
Equity Bank for Savings, F.A. ("Equity")* Purchase Transaction
Great Southern Bancorp, Inc. ("GSB") Pooling Transaction
-----------------
* Financial statements are not presented separately herein.
The historical consolidated statements of income of GSB, whose
fiscal year end is June 30, were changed to a December 31 year end by
adding and subtracting reported six month periods as appropriate.
The combinations of Emprise and Equity are based on the purchase
method of accounting assuming, for pro forma purposes only, that the
acquisitions had been consummated at January 1, 1993. The pro forma
condensed consolidated statements of income for the years ended
December 31, 1992 and 1991 do not include the results of operations of
the acquisitions which are based on the purchase method of accounting.
Historical financial statements will not be restated to reflect the
purchase acquisitions since operations will only be included from the
date of acquisition. The combination of GSB is based on the pooling-
of-interests method of accounting assuming the acquisition had been
consummated at the beginning of the three-year period presented and
other assumptions also described in the following notes. The pro forma
results for the year ended December 31, 1993 are not necessarily
indicative of the results as they may be in the future. The pro forma
condensed consolidated statements of income should be read in
conjunction with the other pro forma and historical financial
statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Year Ended December 31,
---------------------------------------------------
Emprise,
Emprise Equity, and
and Equity GSB GSB GSB
Transactions Transactions Transaction Transaction
1993 1993 1992 1991
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans............. $ 291,795 $ 326,684 $ 301,782 $ 349,697
Interest on short-term investments..... 3,628 3,730 5,087 15,202
Interest and dividends
on investment securities............. 190,974 193,683 169,234 167,803
Interest and dividends on trading
account securities................... 136 136 222 594
----------- ----------- ----------- -----------
Total interest income............. 486,533 524,233 476,325 533,296
----------- ----------- ----------- -----------
Interest expense:
Interest on deposits................... 176,935 187,930 197,345 281,361
Interest on other borrowings........... 23,792 29,652 15,187 17,542
Interest on long-term debt............. 2,286 2,286 3,764 4,683
----------- ----------- ----------- -----------
Total interest expense............ 203,013 219,868 216,296 303,586
----------- ----------- ----------- -----------
Net interest income......................... 283,520 304,365 260,029 229,710
Provision for credit losses................. 9,066 14,283 25,055 46,437
----------- ----------- ----------- -----------
Net interest income after provision
for credit losses......................... 274,454 290,082 234,974 183,273
Non-interest income......................... 108,434 116,006 91,113 93,466
Non-interest expense........................ 292,332 305,668 236,463 229,396
----------- ----------- ----------- -----------
Income before income taxes
minority interest and
extraordinary item........................ 90,556 100,420 89,624 47,343
Income taxes........................... 21,603 25,703 22,579 11,880
----------- ----------- ----------- -----------
Income before minority interest
and extraordinary item.................... 68,953 74,717 67,045 35,463
Minority interest........................... - - (206) (188)
----------- ----------- ----------- -----------
Income before extraordinary item............ $ 68,953 $ 74,717 $ 66,839 $ 35,275
=========== =========== =========== ===========
Income before extraordinary item
applicable to common stock............... $ 61,953 $ 67,718 $ 60,888 $ 35,275
=========== =========== =========== ===========
Earnings before extraordinary item
per common share:
Primary................................. $ 2.35 $ 2.32 $ 2.12 $ 1.26
=========== =========== =========== ===========
Fully diluted........................... $ 2.27 $ 2.25 $ 2.07 $ 1.23
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31,1993
(Unaudited)
(In thousands, except per share amounts)
Combined
Pro Forma Combined
Fourth Financial Emprise Pro Forma Pro Forma
and and ----------------------- ------------------
First Dodge Equity Adj. Combined GSB Adj. Combined
---------------- ---------- ---------- ------------ ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans............ $ 262,905 $ 34,651 $ (2,659)A $ 291,795 $34,889 $ - $ 326,684
(2,508)C -
(594)D -
Interest on short-term
investments......................... 2,165 668 4,372 B 3,628 102 - 3,730
(3,577)D -
Interest and dividends
on investment securities............ 178,812 12,097 65 C 190,974 2,709 - 193,683
Interest and dividends on
trading account securities.......... 136 - - 136 - - 136
------------- ---------- --------- ---------- ------- ----- ---------
Total interest income............. 444,018 47,416 (4,901) 486,533 37,700 - 524,233
------------- ---------- --------- ---------- ------- ----- ---------
Interest expense:
Interest on deposits.................. 158,195 18,930 (190)C 176,935 10,995 - 187,930
Interest on other borrowings.......... 19,095 4,700 (3)A 23,792 5,860 - 29,652
Interest on long-term debt... 2,286 - - 2,286 - - 2,286
------------- ---------- --------- ---------- ------- ----- ---------
Total interest expense............ 179,576 23,630 (193) 203,013 16,855 - 219,868
------------- ---------- --------- ---------- ------- ----- ---------
Net interest income........................ 264,442 23,786 (4,708) 283,520 20,845 - 304,365
Provision for credit losses................ 6,964 2,102 - 9,066 5,217 - 14,283
------------- ---------- --------- ---------- ------- ----- ---------
Net interest income after
provision for credit losses.............. 257,478 21,684 (4,708) 274,454 15,628 - 290,082
Non-interest income........................ 90,735 22,248 (4,549)A 108,434 7,572 - 116,006
Non-interest expense....................... 258,685 32,694 2,243 A 292,332 13,336 - 305,668
-
224 C
1,649 C
(3,163)C
------------- ---------- --------- ---------- ------- ----- ---------
Income before income taxes,
minority interest, and
extraordinary item....................... 89,528 11,238 (10,210) 90,556 9,864 - 100,420
Income taxes ......................... 22,667 1,016 (361)A 21,603 4,100 - 25,703
1,705 B
(1,797)C
(1,627)D
------------- ---------- --------- ---------- ------- ----- ---------
Income before minority interest
and extraordinary item................... 66,861 10,222 (8,130) 68,953 5,764 - 74,717
Minority interest.......................... - - - - - - -
------------- ---------- --------- ---------- ------- ----- ---------
Income before extraordinary item $ 66,861 $ 10,222 $ (8,130) $ 68,953 $ 5,764 $ - $ 74,717
============= ========== ========= ========== ======= ===== =========
Income before extraordinary item
applicable to common and
common-equivalent shares................. $ 59,861 $ 61,953 $ 67,718
============= ========== =========
Earnings before extraordinary
item per common share:
Primary................................ $2.27 $2.35 $2.32
============= ========== =========
Fully diluted.......................... $2.20 $2.27 $2.25
============= ========== =========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31,1992
(Unaudited)
(In thousands, except per share amounts)
Combined
Pro Forma
Fourth Financial Pro Forma
and ------------------
First Dodge GSB Adj. Combined
----------------- --------- ------ ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans....... $ 269,391 $ 32,391 $ - $ 301,782
Interest on short-term
investments.................... 4,756 331 - 5,087
Interest and dividends
on investment securities....... 164,679 4,555 - 169,234
Interest and dividends on
trading account securities..... 222 - - 222
-------------- -------- ----- ---------
Total interest income........ 439,048 37,277 - 476,325
-------------- -------- ----- ---------
Interest expense:
Interest on deposits............. 183,523 13,822 - 197,345
Interest on other borrowings..... 10,342 4,845 - 15,187
Interest on long-term debt... 3,764 - - 3,764
-------------- -------- ----- ---------
Total interest expense....... 197,629 18,667 - 216,296
-------------- -------- ----- ---------
Net interest income................... 241,419 18,610 - 260,029
Provision for credit losses........... 21,358 3,697 - 25,055
-------------- -------- ----- ---------
Net interest income after
provision for credit losses......... 220,061 14,913 - 234,974
Non-interest income................... 84,656 6,457 - 91,113
Non-interest expense.................. 222,274 14,189 - 236,463
-------------- -------- ----- ---------
Income before income taxes,
minority interest, and
extraordinary item.................. 82,443 7,181 - 89,624
Income taxes .................... 19,540 3,039 - 22,579
-------------- -------- ----- ---------
Income before minority interest
and extraordinary item.............. 62,903 4,142 - 67,045
Minority interest..................... (206) - - (206)
-------------- -------- ----- ---------
Income before extraordinary item $ 62,697 $ 4,142 $ - $ 66,839
============== ======== ===== =========
Income before extraordinary item
applicable to common and
common-equivalent shares............ $ 56,746 $ 60,888
============== =========
Earnings before extraordinary
item per common share:
Primary........................... $2.19 $2.12
============== =========
Fully diluted..................... $2.13 $2.07
============== =========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31,1991
(Unaudited)
(In thousands, except per share amounts)
Combined
Pro Forma
Fourth Financial Pro Forma
and ------------------
First Dodge GSB Adj. Combined
----------------- --------- ------ ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans............. $ 314,771 $ 34,926 $ - $ 349,697
Interest on short-term
investments.......................... 14,760 442 - 15,202
Interest and dividends
on investment securities............. 161,821 5,982 - 167,803
Interest and dividends on
trading account securities........... 594 - - 594
-------------- -------- ----- ---------
Total interest income.............. 491,946 41,350 - 533,296
-------------- -------- ----- ---------
Interest expense:
Interest on deposits................... 260,320 21,041 - 281,361
Interest on other borrowings........... 13,188 4,354 - 17,542
Interest on long-term debt... 4,683 - - 4,683
-------------- -------- ----- ---------
Total interest expense............. 278,191 25,395 - 303,586
-------------- -------- ----- ---------
Net interest income......................... 213,755 15,955 - 229,710
Provision for credit losses................. 43,926 2,511 - 46,437
-------------- -------- ----- ---------
Net interest income after
provision for credit losses............... 169,829 13,444 - 183,273
Non-interest income......................... 87,373 6,093 - 93,466
Non-interest expense........................ 215,207 14,189 - 229,396
-------------- -------- ----- ---------
Income before income taxes,
minority interest, and
extraordinary item........................ 41,995 5,348 - 47,343
Income taxes .......................... 10,041 1,839 - 11,880
-------------- -------- ----- ---------
Income before minority interest
and extraordinary item.................... 31,954 3,509 - 35,463
Minority interest........................... (188) - - (188)
-------------- -------- ----- ---------
Income before extraordinary item $ 31,766 $ 3,509 $ - $ 35,275
============== ======== ===== =========
Income before extraordinary item
applicable to common and
common-equivalent shares.............. $ 31,766 $ 35,275
============== =========
Earnings before extraordinary
item per common share:
Primary................................. $1.27 $1.26
============== =========
Fully diluted........................... $1.24 $1.23
============== =========
</TABLE>
<TABLE>
<CAPTION>
Pro forma adjustments and notes to the condensed consolidated statements of income are as
follows:
Year Ended December 31,
-----------------------------------
1993 1992 1991
------ ------ ------
(in thousands)
<S> <C> <C> <C>
(A) To reflect the effect of the sale of non-banking
assets of Equity to LSB Industries, Inc., its
parent, at book value:
Interest and fees on loans and leases. . . . . . . . . . . . . 2,659 -- --
Interest on other borrowings . . . . . . . . . . . . . . . . . 3 -- --
Non-interest income. . . . . . . . . . . . . . . . . . . . . . 4,549 -- --
Non-interest expense . . . . . . . . . . . . . . . . . . . . . 2,243 -- --
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 361 -- --
(B) To reflect interest income earned on proceeds from
the sale of Equity's non-bank assets and the related
income tax effects:
Interest on short-term investments . . . . . . . . . . . . . . 4,372 -- --
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 1,705 -- --
(C) To reflect adjustments resulting from the purchase
method of accounting for Emprise and Equity:
Interest and fees on loans and leases. . . . . . . . . . . . . 2,508 -- --
Investment securities. . . . . . . . . . . . . . . . . . . . . 65 -- --
Interest on deposits . . . . . . . . . . . . . . . . . . . . . 190 -- --
Noninterest expense (amortization of
purchased mortgage servicing rights) . . . . . . . . . . . . 224 -- --
Noninterest expense (amortization of
purchased credit card relationships) . . . . . . . . . . . . 1,649 -- --
Noninterest expense (amortization of
cost in excess of net assets acquired) . . . . . . . . . . . 3,163 -- --
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 1,797 -- --
(D) To reflect the foregone interest income on
short-term investments converted to cash and
used for the purchase of Emprise and Equity
and the related income tax effects:
Interest and fees on loans and leases. . . . . . . . . . . . . 594 -- --
Interest on short-term investments . . . . . . . . . . . . . . 3,577 -- --
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 1,627 -- --
</TABLE>
Pro forma earnings per common share after the pending purchase
transactions are based on the following weighted average number of
shares outstanding:
Year Ended
December 31, 1993
-----------------
Primary. . . . . . . . . . . . . . . . . . . . . . . 26,396,058
Fully diluted. . . . . . . . . . . . . . . . . . . . 30,426,772
Pro forma earnings per common share after the pending GSB
transaction are based on the following weighted average number of
shares outstanding:
YEAR ENDED DECEMBER 31,
-----------------------
1993 1992 1991
------ ------ ------
Primary. . . . . . . . . . . . . 29,139,451 28,786,938 28,100,950
Fully diluted. . . . . . . . . . 33,178,011 32,385,707 28,943,072
Primary earnings per common share were computed by dividing net
income applicable to common and common-equivalent shares by the
weighted average common and common-equivalent shares outstanding during
the period. Fully diluted earnings per common share were computed by
adjusting net income for interest expense (net of income taxes)
associated with convertible debt. The adjusted net income was then
divided by the weighted average of common and common-equivalent shares
outstanding plus the number of shares which would have been outstanding
during the year had convertible securities been converted in accordance
with their respective governing instruments. Note 17 to the Fourth
Financial 1993 Consolidated Financial Statements more fully describes
Fourth Financial's common stock equivalents and convertible securities.
The adjustment of net income for convertible debt interest expense (net
of income taxes) was as follows:
Year Ended December 31,
-------------------------------
1993 1992 1991
------ ------ ------
(in thousands)
Interest expense adjustment . . . . . . .$ 4 $ 85 $ 264
It is anticipated that GSB will convert from a savings and loan
association to a national bank at the time of the business combination.
Due to the difference between how a bank and a savings and loan are
taxed on additions to their respective allowances for credit losses and
account for the related deferred income taxes, it is anticipated that
GSB will record an estimated $6,100,000 charge to income tax expense
associated with the charter conversion. Other adjustments to conform
the accounting policies of GSB to the accounting policies of Fourth
Financial are not material. Not included in the pro forma condensed
consolidated statements of income are $2,615,000 (net of a $1,602,000
tax benefit) of nonoperating charges associated with the acquisition of
GSB. These nonoperating charges include severance and other
compensation payments, data processing contract settlements and
conversions, the write down of duplicate or obsolete facilities, and
other similar charges.
Independent Accountants' Report
Board of Directors
Great Southern Bancorp, Inc.
Springfield, Missouri
We have audited the consolidated statements of financial condition
of GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES as of June 30, 1993
and 1992, and the related consolidated statements of income, statements
of changes in stockholders' equity and statements of cash flows for
each of the three years in the period ended June 30, 1993. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES as of June 30, 1993
and 1992, and the results of its operations and its cash flows for each
of the three years in the period ended June 30, 1993, in conformity
with generally accepted accounting principles.
/s/ Baird, Kurtz & Dobson
August 6, 1993
Springfield, Missouri
<TABLE>
<CAPTION>
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1993 AND 1992
ASSETS
- ------
1993 1992
---- ----
<S> <C> <C>
Cash $ 3,776,232 $ 3,664,052
Interest-bearing deposits in other financial institutions 12,832,162 22,905,453
------------ ------------
Cash and cash equivalents 16,608,394 26,569,505
Investment securities (fair value $57,400,000 - 1993;
$67,000,000 - 1992) (Notes 2, 7, 8 and 13) 57,077,737 65,960,602
Loans receivable, net (Notes 3, 7 and 8) 419,527,061 352,016,296
Foreclosed assets held for sale, net (Note 4) 8,908,793 12,385,880
Premises and equipment (Note 5) 6,276,374 5,913,350
Accrued interest receivable
Loans 2,848,003 2,418,209
Investments 966,887 1,749,969
Prepaid expenses and other assets 1,723,871 2,217,602
Excess of cost over fair value of net assets
acquired (Note 1) 1,356,301 1,441,081
------------ ------------
Total Assets $515,293,421 $470,672,494
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Savings deposits (Notes 2 and 6) $326,611,238 $350,346,318
Federal Home Loan Bank advances (Note 7) 114,923,356 48,980,484
Short-term borrowings (Note 8) 15,329,476 16,013,857
Advance payments by borrowers for taxes and insurance 2,727,416 2,593,216
Accounts payable and accrued expenses 2,431,376 2,150,620
Income taxes payable (Note 9) 1,528,505 672,221
Deferred income 18,703 36,877
------------ ------------
Total Liabilities 463,570,070 420,793,593
------------ ------------
Commitments and contingencies (Notes 13 and 14)
Capital stock
Serial preferred stock, $.01 par value; authorized
1,000,000 shares
Common stock, $.01 par value; authorized 10,000,000
shares, issued 2,054,167 shares 20,542 20,542
Additional paid-in capital 16,409,261 16,389,961
Retained earnings - substantially restricted
(Notes 1, 9 and 17) 42,842,136 38,688,681
Employee Stock Ownership Plan debt (Note 18) (223,588) (619,889)
Treasury stock, at cost; 1993 - 460,688 shares;
1992 - 368,716 shares (7,325,000)
------------ ------------
Total Stockholders' Equity 51,723,351 49,878,901
------------ ------------
Total Liabilities and Stockholders' Equity $515,293,421 $470,672,494
============ ============
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED JUNE 30, 1993
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME
Loans $33,181,795 $32,653,375 $36,066,863
Investment securities 3,819,053 5,914,010 6,254,265
Other 160,854 455,998 608,276
----------- ----------- -----------
37,161,702 39,023,383 42,929,404
----------- ----------- -----------
INTEREST EXPENSE
Deposits (Note 6) 11,549,911 17,467,043 23,806,034
FHLB advances 4,953,561 4,146,846 3,736,097
Short-term borrowings 306,138 522,535 791,075
----------- ----------- -----------
16,809,610 22,136,424 28,333,206
----------- ----------- -----------
NET INTEREST INCOME 20,352,092 16,886,959 14,596,198
PROVISION FOR LOAN LOSSES
(Note 3) 4,676,953 2,857,060 1,864,029
----------- ----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 15,675,139 14,029,899 12,732,169
----------- ----------- -----------
NONINTEREST INCOME
Commissions 3,353,035 2,988,619 2,668,257
Service charge fees 1,762,520 1,622,834 1,601,608
Profit on sale of loans 387,034 295,404 60,945
Other income 1,338,683 1,293,326 1,325,227
----------- ----------- -----------
6,841,272 6,200,183 5,656,037
----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and employee benefits 6,958,504 6,359,593 6,078,971
Net occupancy expense of premises 1,761,066 1,650,601 1,628,903
Postage 521,730 507,767 491,334
Insurance 1,107,513 1,185,966 1,142,646
Advertising 561,852 503,121 418,157
Office supplies and printing 441,755 455,967 417,592
(Income) expense on foreclosed
assets (351,943) 1,068,032 647,222
Other expenses 2,246,357 2,163,518 2,932,570
----------- ----------- -----------
13,246,834 13,894,565 13,757,395
----------- ----------- -----------
INCOME BEFORE
INCOME TAXES 9,269,577 6,335,517 4,630,811
PROVISION FOR INCOME TAXES
(Note 9) 4,533,500 2,544,000 1,368,300
----------- ----------- -----------
NET INCOME $ 4,736,077 $ 3,791,517 $ 3,262,511
=========== =========== ===========
EARNINGS PER COMMON SHARE
(Notes 1 and 19) $ 2.77 $ 2.05 $ 1.66
====== ====== ======
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED JUNE 30, 1993
Additional Employee Stock
Common Paid-in Retained Ownership Treasury
Stock Capital Earnings Plan Debt Stock Total
------------ ------------ ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
JULY 1, 1990 $ 20,542 $ 16,382,799 $ 32,947,176 $ (1,483,060) $ (217,277) $ 47,650,180
Net income 3,262,511 3,262,511
Stock issued under Stock
Option Plan (Note 19) 7,162 214,088 221,250
Dividends declared,
$.36 per share (685,585) (685,585)
Reduction of Employee
Stock Ownership Plan
debt 449,813 449,813
Treasury stock purchased (1,669,229) (1,669,229)
------------ ------------ ------------ ----------- ------------ -------------
BALANCE,
JUNE 30, 1991 20,542 16,389,961 35,524,102 (1,033,247) (1,672,418) 49,228,940
Net income 3,791,517 3,791,517
Stock issued under Stock
Option Plan (Note 19) 23,112 23,112
Dividends declared,
$.36 per share (626,938) (626,938)
Reduction of Employee
Stock Ownership Plan
debt 413,358 413,358
Treasury stock purchased (2,951,088) (2,951,088)
------------ ------------ ------------ ----------- ------------ -------------
BALANCE,
JUNE 30, 1992 20,542 16,389,961 38,688,681 (619,889) (4,600,394) 49,878,901
Net income 4,736,077 4,736,077
Stock issued under Stock
Option Plan (Note 19) 19,300 90,066 109,366
Dividends declared,
$.36 per share (582,622) (582,622)
Reduction of Employee
Stock Ownership Plan
debt 396,301 396,301
Treasury stock purchased (2,814,672) (2,814,672)
------------ ------------ ------------ ----------- ------------ -------------
BALANCE,
JUNE 30, 1993 $ 20,542 $ 16,409,261 $ 42,842,136 $ (223,588) $ (7,325,000) $ 51,723,351
============ ============ ============ =========== ============ =============
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED JUNE 30, 1993
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 4,736,077 $ 3,791,517 $ 3,262,511
Items not requiring (providing) cash
Depreciation 574,892 577,440 551,027
Amortization 84,780 84,780 84,780
Provision for loan losses 4,676,953 2,857,060 1,864,029
Provision for losses on foreclosed assets 432,000 1,282,972 750,000
Gain on sale of loans (387,034) (295,404) (60,945)
FHLB stock dividends received (390,000) (348,900) (261,300)
(Gain) loss on sale of premises
and equipment (10,088) 9,753 24,725
Gain on sale of foreclosed assets (818,057) (791,548) (453,700)
Amortization of deferred income,
premiums and discounts 157,496 464,045 (378,804)
Changes in:
Accrued interest receivable 353,288 575,210 (246,760)
Prepaid expenses and other assets 493,731 (153,110) (206,411)
Accounts payable and accrued
expenses 280,756 138,776 930,709
ESOP contributions payable - - (150,000)
ESOP debt 396,301 413,358 449,813
Income taxes payable 856,284 203,992 94,351
------------------ ------------------ ------------------
Net cash provided by
operating activities 11,437,379 8,809,941 6,254,025
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Net (increase) decrease in loans (64,320,847) (9,174,708) 21,793,198
Proceeds from sale of loans 671,055 1,503,830 -
Purchase of loans (1,422,606) (10,122,081) (7,448,720)
Purchase of premises and equipment (1,004,180) (725,882) (1,077,288)
Proceeds from sale of premises
and equipment 76,352 26,517 99,037
Proceeds from sale of foreclosed
assets 618,474 1,706,805 993,678
Capitalized costs on foreclosed assets (2,440,732) (656,122) (592,936)
Proceeds from maturing investment
securities 34,105,752 48,185,000 33,994,381
Purchase of investment securities (26,051,441) (28,924,807) (52,603,606)
Net change in interest-bearing
deposits - - 200,000
------------------ ------------------ ------------------
Net cash provided by (used in)
investing activities (59,768,173) 1,818,552 (4,642,256)
------------------ ------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net redemption of certificates
of deposit (33,301,374) (20,500,536) (14,368,292)
Net increase in checking and savings 9,566,294 21,777,128 14,322,792
Proceeds from FHLB advances 162,721,500 41,630,600 91,000,000
Repayments of FHLB advances (96,778,628) (43,150,116) (88,724,000)
Net increase (decrease) in
short-term borrowings (684,381) 3,052,292 (1,750,004)
Advances from borrowers for
taxes and insurance 134,200 (161,876) 523,365
Purchase of treasury stock (2,814,672) (2,951,088) (1,669,229)
Treasury stock issued to fund
restricted stock awards 221,250
Dividends paid (582,622) (626,938) (685,585)
Stock options exercised 109,366 23,112 -
------------------ ------------------ ------------------
Net cash provided by (used in)
financing activities 38,369,683 (907,422) (1,129,703)
------------------ ------------------ ------------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (9,961,111) 9,721,071 482,066
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 26,569,505 16,848,434 16,366,368
------------------ ------------------ ------------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 16,608,394 $ 26,569,505 $ 16,848,434
================== ================== ==================
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1992 AND 1991
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
In December 1989, Great Southern Bancorp, Inc. ("GSBC" or the
"Company") completed the issuance of 2,054,167 shares of common stock
in connection with the conversion of Great Southern Savings Bank (the
"Savings Bank") from a mutual savings and loan association to a stock
savings bank (the "Conversion"). Concurrent with the Conversion, GSBC
acquired all of the capital stock of the Savings Bank and became a
savings bank holding company (see Note 17). GSBC's business currently
consists of the business of the Savings Bank which includes providing
financial services, as well as travel, insurance, investment services,
loan closings and appraisals through GSBC's other wholly-owned
subsidiaries. The Company and the Savings Bank are subject to the
regulation of certain federal and state agencies and undergo periodic
examinations by those regulatory agencies.
Basis of Financial Statement Presentation
- -----------------------------------------
The financial statements have been prepared in accordance with
generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period.
Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for loan losses and
the valuation of real estate acquired in connection with foreclosures
or in satisfaction of loans. In connection with the determination of
the allowances for loan losses and the valuation of foreclosed assets,
management obtains independent appraisals for significant properties.
Management believes that the allowances for losses on loans and
valuations of foreclosed assets are adequate and appropriate. While
management uses available information to recognize losses on loans and
foreclosed assets, future loss may be accruable based on changes in
economic conditions, particularly in southwest and central Missouri. In
addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Savings Bank's allowances
for losses on loans and valuations of foreclosed assets. Such agencies
may require the Savings Bank to recognize additional losses based on
their judgments of information available to them at the time of their
examination.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Great
Southern Bancorp, Inc. and its wholly-owned subsidiaries, Great
Southern Savings Bank, Great Southern Capital Management, Great
Southern Financial Corporation and its wholly-owned subsidiary,
Appraisal Services, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
Reclassifications
- -----------------
Certain 1992 and 1991 amounts have been reclassified to conform to
the 1993 financial statements presentation. These reclassifications
had no effect on net income.
Cash and Investment Securities
- ------------------------------
Regulations require the Savings Bank to maintain an amount in cash
and U.S. government and other approved securities equal to 5.0% of
savings deposits (net of loans on savings deposits) plus short-term
borrowings.
Investments in debt securities intended to be held until maturity are
valued at cost and adjusted for amortization of premium and accretion
of discount. Premium and discount on investment securities are
amortized (deducted) and accreted (added), respectively, to interest
income on the level-yield method over the period to maturity of the
related securities.
Interest and dividends on investment securities are reported in
operating income. Realized gains and losses on the sale of investment
securities are reported separately as securities gains (losses). Gains
and losses on security transactions are recognized using the specific
identification method.
In determining whether securities can be held until maturity,
management considers whether there are conditions, such as regulatory
requirements, which would impair its ability to hold such securities
until maturity. At present, management is not aware of any such
conditions, and therefore, no provision for any excess of cost over
market values has been provided.
Excess of Cost Over Fair Value of Net Assets Acquired
- -----------------------------------------------------
Unamortized costs in excess of the fair value of underlying net
tangible assets acquired were $1,356,301 and $1,441,081 (originally
$2,422,318) at June 30, 1993 and 1992, respectively, and are being
amortized over a twenty-year period using the straight-line method.
Loans Held for Sale
- -------------------
Mortgage loans originated and intended for sale in the secondary
market are carried at the lower of cost or estimated fair value in the
aggregate. There were no loans held for sale at June 30, 1993 and
1992.
Allowance for Loan Losses
- -------------------------
The allowance for loan losses is maintained at an amount considered
adequate to provide for potential losses. The provision for loan
losses is based on periodic analysis of the loan portfolio by
management. In this regard, management considers numerous factors
including, but not necessarily limited to, general economic conditions,
loan portfolio composition, prior loss experience and independent
appraisals.
Foreclosed Assets Held for Sale
- -------------------------------
Assets acquired by foreclosure or in settlement of debt and held for
sale are valued at fair value as of the date of foreclosure, and a
related valuation allowance is provided for estimated costs to sell the
assets. Management evaluates the value of foreclosed assets
periodically and increases the valuation allowance for any subsequent
declines in estimated fair value. Changes in the valuation allowance
are charged or credited to noninterest expense. If management deems
the decline in fair value to be permanent, the carrying value of the
asset is reduced directly by a charge to noninterest expense. Costs
for development and improvement of the assets are capitalized.
Assets acquired by foreclosure also include loans upon which the
foreclosure process is imminent or has been initiated but not completed
and considered in-substance foreclosed. Such assets are carried at
fair value, and a related valuation allowance is provided for estimated
costs to sell the assets.
Loans to facilitate the sale of assets acquired in foreclosure are
discounted if made at less than market rates. Discounts are amortized
over the fixed interest period of each loan using the interest method.
Premises and Equipment
- ----------------------
Office properties and equipment are stated at cost less accumulated
depreciation and include expenditures for major betterments and
renewals. Maintenance, repairs and minor renewals are expensed as
incurred. When property is retired or sold, the retired asset and
related accumulated depreciation are removed from the accounts and the
resulting gain or loss taken into income.
Depreciation is computed by use of straight-line and accelerated
methods over the estimated useful lives of the assets.
Interest Income
- ---------------
Interest on loans is credited to income as earned. Interest is not
recognized on loans which are ninety days or more contractually
delinquent. Such excluded interest, when ultimately collected, is
credited to income at the time of receipt.
Loan Servicing Income
- ---------------------
Loan servicing income represents fees earned for servicing real
estate mortgage loans owned by various investors. The fees are
generally calculated on the outstanding principal balances of the loans
serviced and are recorded as income when earned.
Loan Origination Fees
- ---------------------
Loan fees and certain direct loan origination costs are deferred, and
the net fee or cost is recognized in interest income using the level-
yield method over the contractual life of the loan.
Retained Earnings
- -----------------
Capital regulations require that all savings institutions have
tangible capital of 1.5% of adjusted total assets, a leverage ratio (or
core capital) of 3% of adjusted total assets and, for 1993, risk-based
capital of at least 8.0% of risk-weighted assets. Risk-based capital
of 7.2% was required at June 30, 1992. The following is a
reconciliation of the Savings Bank's GAAP capital to regulatory capital
at June 30, 1993:
<TABLE>
<CAPTION>
Unaudited Regulatory
---------------------------------------------
Tangible Core Risk-Based
Capital Capital Capital
------- ------- -------
<S> <C> <C> <C>
GAAP capital $ 43,455,505 $ 43,455,505 $ 43,455,505
Nonallowable capital:
Guarantee of ESOP debt (223,588) (223,588) (223,588)
Nonallowable assets:
Goodwill - total (1,351,301)
Additional capital items:
General valuation allowances -
limited 4,578,000
-------------- ----------- ----------
Regulatory capital - computed 41,880,616 43,231,917 47,809,917
Minimum capital requirement 7,698,135 15,396,270 28,835,519
-------------- ---------- -----------
Regulatory capital - excess $ 34,182,481 $27,835,647 $ 18,974,398
============== ========== ===========
</TABLE>
The amount of dividends that the Savings Bank may pay is subject to
various regulatory limitations. At June 30, 1993, approximately
$10,800,000 was available from Savings Bank retained earnings, without
regulatory approval, for distribution as dividends to GSBC. The
Savings Bank's internal capital policies provide for greater
restrictions than regulatory guidelines and, under internal policies,
approximately $974,000 was available for distribution as dividends to
GSBC.
Earnings Per Share
- ------------------
For each of the three years ended June 30, 1993, 1992 and 1991,
earnings per common share are based on the weighted average number of
common and common equivalent shares outstanding during the year less
the weighted average number of shares of treasury stock.
Such average shares include the weighted average number of common
shares considered outstanding, plus the shares issuable upon exercise
of stock options after the assumed repurchase of common shares with the
related proceeds as follows:
<TABLE>
<CAPTION>
Weighted Average
Number of Shares
Common Shares Issuable
----------------- --------
<S> <C> <C>
1993 1,632,996 75,898
1992 1,767,589 82,313
1991 1,934,248 34,108
</TABLE>
Income Taxes
- ------------
Deferred income taxes are provided on income reported for financial
statement purposes in periods which differ from those in which they are
subject to taxation.
Cash Equivalents
- ----------------
The Company considers all highly liquid interest-bearing deposits in
other financial institutions with an original maturity of three months
or less to be cash equivalents.
NOTE 2: INVESTMENT SECURITIES
<TABLE>
<CAPTION>
June 30, 1993
---------------------------------------------------------------------------------------
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
-------------- ---------------- ----------------- -----------
<S> <C> <C> <C> <C>
Debt Securities:
U.S. Treasury
Obligations $ 2,252,452 $ 18,548 $ $ 2,271,000
U.S. government
agencies and
corporations
obligations 48,480,000 330,207 30,207 48,780,000
Obligations of state
and political
subdivisions 469,505 495 470,000
--------------- ------------------ ------------------ ------------------
Total Debt Securities 51,201,957 $ 349,250 $ 30,207 51,521,000
--------------- ================== ================== ------------------
Equity Securities:
Federal Home Loan
Bank stock 5,858,800 5,858,800
Other 16,980 20,200
--------------- ------------------
Total Equity
Securities 5,875,780 5,879,000
--------------- ------------------
$ 57,077,737 $ 57,400,000
=============== ==================
</TABLE>
<TABLE>
<CAPTION>
June 30, 1992
---------------------------------------------------------------------------------------
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
-------------- ---------------- ----------------- -----------
<S> <C> <C> <C> <C>
Debt Securities:
U.S. Treasury
obligations $ 2,162,106 $ 39,675 $ 781 $ 2,201,000
U.S. government
agencies and
corporations
obligations 59,273,952 1,000,938 890 60,274,000
Obligations of state
and political
subdivisions 475,540 460 476,000
--------------- ------------------ ------------------ ------------------
Total Debt Securities 61,911,598 $ 1,041,073 $ 1,671 62,951,000
--------------- ================== ================== ------------------
Equity Securities:
Federal Home Loan
Bank stock 4,046,400 4,046,400
Other 2,604 2,600
--------------- ------------------
Total Equity
Securities 4,049,004 4,049,000
--------------- ------------------
$ 65,960,602 $ 67,000,000
=============== ==================
</TABLE>
Maturities of debt securities at June 30, 1993, were:
<TABLE>
<CAPTION>
Amortized Cost Fair Value
-------------- ----------
<S> <C> <C>
In one year or less $ 31,021,572 $ 31,319,000
After one through five years 19,710,880 19,732,000
Other securities, not due on a single maturity date 469,505 470,000
----------------- ------------------
$ 51,201,957 $ 51,521,000
------------------ ------------------
------------------ ------------------
</TABLE>
There were no sales of debt securities in 1993, 1992 or 1991.
Accordingly, there were no gross realized gains or losses in those
years.
The Savings Bank is a member of the Federal Home Loan Bank system.
As a member of this system, it is required to maintain an investment in
capital stock of the Federal Home Loan Bank in an amount equal to the
greater of 1% of its outstanding home loans, 0.3% of its total assets,
or one-twentieth of its outstanding advances from the Bank. No ready
market exists for such stock, and it has no quoted market value. For
disclosure purposes, such stock is assumed to have a fair value which
is equal to cost.
United States government obligations with a carrying value of
$9,963,000 and fair value of $10,042,000 were pledged at June 30, 1993,
as collateral for public deposits. United States government
obligations with a carrying value of $7,591,000 and fair value of
$7,692,000 were pledged as collateral at June 30, 1993, for the Savings
Bank's collateralized borrowing accounts. United States government
obligations with a carrying value of $17,727,000 and fair value of
$17,731,000 were pledged as collateral for an outstanding letter of
credit described in Note 13. In addition, United States government
obligations with a carrying value of $11,264,000 and fair value of
$11,362,000 were pledged as collateral for Federal Home Loan Bank
advances described in Note 7.
NOTE 3: LOANS RECEIVABLE
<TABLE>
<CAPTION>
Loans receivable consist of the following:
June 30,
-------------------------------------------
1993 1992
---- ----
<S> <C> <C>
One to four family residential loans $ 202,420,574 $ 195,100,049
Other residential mortgage loans 45,412,806 41,313,449
Commercial real estate loans 93,318,360 74,842,332
Other commercial loans 14,162,743 14,613,252
One to four family construction loans 17,433,140 10,222,580
Other residential construction loans 38,675,197 3,570,785
Commercial construction loans 41,797,630 6,655,081
Mortgage-backed securities 3,558,965 4,462,585
Installment and education loans 16,342,182 13,718,690
Discounts on loans purchased (1,762,378) (1,923,141)
Undisbursed portion of loans in process (38,879,212) (3,721,537)
Allowance for loan losses (10,590,314) (6,029,437)
Deferred loan fees and gains, net (2,362,632) (808,392)
-------------- --------------
$ 419,527,061 $ 352,016,296
============== ==============
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 6,029,437 $ 4,732,362 $ 5,416,568
Provision charged to operations 4,676,953 2,857,060 1,864,029
Loans charged off (417,698) (2,060,970) (2,940,552)
Recoveries 301,622 500,985 392,317
------------------- ------------------ -------------------
Balance, end of year $ 10,590,314 $ 6,029,437 $ 4,732,362
================== ================== ===================
</TABLE>
The weighted average interest rate on loans receivable at June 30,
1993 and 1992, was 7.74% and 8.54%, respectively.
The Savings Bank serviced whole mortgage loans and participations in
mortgage loans for others amounting to $74,994,000, $58,655,000 and
$58,049,000 at June 30, 1993, 1992 and 1991, respectively.
Loans on which the accrual of interest has been discontinued amounted
to $1,918,000, $4,600,000 and $5,200,000 at June 30, 1993, 1992 and
1991, respectively. If interest on these loans had been
accrued, such interest income would have approximated $101,000,
$540,000 and $337,000 for the years ended June 30, 1993, 1992 and 1991,
respectively.
Certain directors and executive officers of the Company and its
subsidiary Savings Bank were customers of and had transactions with the
subsidiary Savings Bank in the ordinary course of business. In the
opinion of management, all loans included in such transactions were
made on substantially the same terms as those prevailing at the time
for comparable transactions with unrelated parties. At June 30, 1993
and 1992, loans outstanding to these directors and executive officers
amounted to $764,000 and $1,064,000, respectively.
Certain of the Savings Bank's real estate loans are pledged as
collateral for borrowings as set forth in Notes 7 and 8.
NOTE 4: FORECLOSED ASSETS HELD FOR SALE
<TABLE>
<CAPTION>
June 30,
-------------------------------------------
1993 1992
---- ----
<S> <C> <C>
In-substance foreclosures $ 4,348,529 $ 5,884,296
Foreclosed assets 3,763,038 4,246,357
Real estate sold under contract for
deed and other arrangements 1,989,337 3,372,700
------------------ -------------------
10,100,904 13,503,353
Valuation allowance (1,192,111) (1,117,473)
------------------ -------------------
$ 8,908,793 $ 12,385,880
================== ===================
</TABLE>
Changes in the valuation allowance on foreclosed assets were as
follows:
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 1,117,473 $ 1,186,256 $ 1,258,031
Provision charged to operations 432,000 1,282,972 750,000
Charge-offs (357,362) (1,351,755) (821,775)
------------------- ------------------ -------------------
Balance, end of year $ 1,192,111 $ 1,117,473 $ 1,186,256
================== ================== ===================
</TABLE>
NOTE 5: PREMISES AND EQUIPMENT
Premises and equipment consist of the following:
<TABLE>
<CAPTION>
June 30,
----------------------------------------
1993 1992
---- ----
<S> <C> <C>
Land $ 1,466,520 $ 1,349,991
Buildings and improvements 7,479,071 7,201,954
Furniture, fixtures and equipment 3,777,892 3,737,232
-------------- --------------
12,723,483 12,289,177
Less accumulated depreciation 6,447,109 6,375,827
-------------- --------------
$ 6,276,374 $ 5,913,350
============== ==============
</TABLE>
Depreciation expense was $574,892, $577,440 and $551,027 for 1993, 1992
and 1991, respectively.
NOTE 6: SAVINGS DEPOSITS
Savings deposits consist of the following:
<TABLE>
<CAPTION>
June 30,
Weighted Average -------------------------------------
Interest Rate 1993 1992
------------- ---- ----
<S> <C> <C> <C>
Checking accounts $ 5,322,000 $ 4,083,968
Interest-bearing checking 2.18% - 2.73% 98,628,682 93,248,301
Savings accounts 2.50% - 3.47% 40,462,270 37,337,914
--------------- --------------
144,412,952 134,670,183
--------------- --------------
Certificate accounts 0% - 3.99% 104,687,155 37,525,405
4% - 5.99% 42,167,672 110,867,326
6% - 7.99% 29,091,891 58,167,700
8% - 9.99% 2,459,431 4,763,852
10% - 11.99% 2,838,080 2,738,664
--------------- --------------
181,244,229 214,062,947
--------------- --------------
Accrued interest on savings deposits 954,057 1,613,188
--------------- --------------
$ 326,611,238 $ 350,346,318
=============== ==============
</TABLE>
The weighted average interest rate on certificates of deposit at June
30, 1993 and 1992, was 4.31% and 5.06%, respectively.
The aggregate amount of short-term jumbo certificates of deposit in
excess of $100,000 was approximately $23,000,000 and $35,700,000 at
June 30, 1993 and 1992, respectively.
A summary of savings certificates by maturity date for years ending
June 30 is as follows:
1994 $ 128,142,035
1995 23,343,067
1996 7,901,301
1997 and thereafter 21,857,826
-------------------
$ 181,244,229
===================
A summary of interest expense on deposits is as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Checking accounts $ 1,988,702 $ 2,778,531 $ 3,020,286
Savings accounts 1,039,455 1,350,783 1,420,849
Certificate accounts 8,569,364 13,396,951 19,430,792
Early withdrawal penalties (47,610) (59,222) (65,893)
------------------ ------------------ ------------------
$ 11,549,911 $ 17,467,043 $ 23,806,034
================== ================== ==================
</TABLE>
NOTE 7: ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank consist of the following:
<TABLE>
<CAPTION>
June 30,
-------------------------------------------------------------------------------------
1993 1992
---------------------------------------- -----------------------------------------
Weighted Average Weighted Average
Amount Interest Rate Amount Interest Rate
------ ---------------- ------ ------------------
<S> <C> <C> <C> <C>
1993 $ % $ 8,244,389 9.42%
1994 82,048,179 4.25 12,968,899 8.58
1995 1,380,371 6.35 1,295,874 6.34
1996 3,614,860 6.85 3,524,640 6.90
1997 7,419,456 6.90 7,322,960 6.91
1998 1,978,163 6.13 400,000 7.35
1999 and
thereafter 18,482,327 7.89 15,223,722 8.08
--------------- ------- ------------------ -----
$ 114,923,356 5.15% $ 48,980,484 8.12%
=============== ======= ================== =====
</TABLE>
In addition to the above advances, the Savings Bank had available
a line of credit amounting to $2,223,000 and $45,900,000 with the FHLB
at June 30, 1993 and 1992, respectively.
Although no loans are specifically pledged, the FHLB requires the
Savings Bank to maintain FHLB stock, investment securities and first
mortgage loans free of pledges, liens and encumbrances in an amount
equal to at least 170% of outstanding advances as collateral for such
borrowings. Investment securities of approximately $11,264,000 are
specifically pledged as collateral for advances at June 30, 1993.
NOTE 8: SHORT-TERM BORROWINGS
Short-term borrowings consists of the following:
<TABLE>
<CAPTION>
June 30,
-----------------------------------------
1993 1992
---- ----
<S> <C> <C>
United States government securities sold
under repurchase agreements $ 8,176,733 $ 9,361,345
Other borrowed money 7,152,743 6,652,512
------------------ -------------------
$ 15,329,476 $ 16,013,857
================== ===================
</TABLE>
The Savings Bank enters into sales of securities under agreements to
repurchase (reverse repurchase agreements). Reverse repurchase
agreements are treated as financings, and the obligations to repurchase
securities sold are reflected as a liability in the Statement of
Financial Condition. The dollar amount of securities underlying the
agreements remains in the asset accounts.
Other borrowed money consists of agreements with corporate entities
which are secured by a pledge of residential mortgage loans.
Securities sold under reverse repurchase agreements had book values
including accrued interest of $7,800,526 and $8,642,401 and fair values
of $7,901,000 and $8,789,000 at June 30, 1993 and 1992, respectively.
Mortgage loans securing other borrowed money accounts had carrying
values of $23,560,000 and $30,466,000 at June 30, 1993 and 1992,
respectively.
Short-term borrowings had weighted average interest rates of 1.81%
and 2.57% at June 30, 1993 and 1992, respectively. Securities and
mortgage loans underlying the agreements were being held by the Savings
Bank during the agreement period. All agreements are written on a one
month or less term.
Short-term borrowings averaged $15,738,000, $13,463,000 and
$13,388,000 for the years ended June 30, 1993, 1992 and 1991,
respectively. The maximum amounts outstanding at any month end were
$27,543,000, $16,014,000 and $14,379,000 during the years ended June
30, 1993, 1992 and 1991, respectively.
NOTE 9: INCOME TAXES
In computing federal income taxes, the Savings Bank has been allowed
a percentage of otherwise taxable income as a statutory bad debt
deduction, subject to limitations based on aggregate loans and savings
balances. The percentage is currently 8%.
As of June 30, 1993, appropriation of retained earnings representing
bad debt deductions amounted to approximately $17,400,000. If these
bad debt reserves are used for purposes other than loan losses, the
amount used will be subject to federal income tax at the prevailing
corporate rate.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Years Ended June 30,
---------------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current $ 4,408,500 $ 2,494,000 $ 1,256,300
Deferred 125,000 50,000 112,000
------------------ ------------------ ------------------
$ 4,533,500 $ 2,544,000 $ 1,368,300
================== ================== ==================
</TABLE>
Deferred income taxes result from timing differences in the
recognition of income and expense for tax and financial reporting
purposes. The sources of these timing differences and their tax effect
are as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Deferred income $ 5,000 $ (15,000) $ 20,000
Investment securities accretion - (15,000) 12,000
FHLB stock dividend 120,000 80,000 80,000
------------------ ---------------- -----------------
$ 125,000 $ 50,000 $ 112,000
================== ================ =================
</TABLE>
Reconciliations of the Company's provision for income taxes to the
statutory corporate tax rates are as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Tax at statutory rate 34.0% 34.0% 34.0%
Bad debt deduction, nondeductible
provision for losses 13.5 1.4 (2.2)
Nontaxable gain/loss on real estate
acquired by foreclosure (1.4) 4.5 (3.3)
Nontaxable purchase accounting income .3 .3 .3
Nontaxable interest on
investment securities (.5) (.8) (1.1)
State income taxes 3.5 1.1 .4
Other (.5) (.3) 1.4
--------- --------- ---------
48.9% 40.2% 29.5%
========= ========= =========
</TABLE>
The nontaxable income from purchase accounting results from
differences in value assigned to assets and liabilities under purchase
accounting and carryover tax basis.
The Company and its consolidated subsidiaries have not been audited
recently by the Internal Revenue Service with respect to consolidated
federal income tax returns, and as such, these returns have been closed
without audit through June 30, 1988.
State legislation provides that savings banks will be taxed based on
an annual privilege tax of 7% of net income. The 1993 and 1992 tax
included in the provision for income tax amounts to $425,000 and
$65,000, respectively. No provision has been made in these financial
statements for the 1991 privilege tax as it was offset by refund claims
of previously paid state taxes and/or state tax credits.
Income taxes payable at June 30, 1993 and 1992, include deferred
taxes payable of $375,000 and $250,000, respectively.
NOTE 10: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Cash and Cash Equivalents
- -------------------------
The carrying amounts reported in the balance sheet for cash and cash
equivalents approximate those assets' fair value.
Investment Securities
- ---------------------
For securities held as investments, fair value equals quoted market
price, if available. If a quoted market price is not available, fair
value is estimated using quoted market prices for similar securities.
Loans Receivable
- ----------------
The fair value of loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining
maturities. Loans with similar characteristics are aggregated for
purposes of the calculations. The carrying amount of accrued interest
approximates its fair value.
Deposit Liabilities
- -------------------
The fair value of demand deposits and savings accounts is the amount
payable on demand at the reporting date (i.e., their carrying amounts).
The fair value of fixed-maturity certificates of deposit is estimated
using a discounted cash flow calculation that applies the rates
currently offered for deposits of similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit
- ----------------------------------------------------------
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present credit worthiness of
the counterparties. For fixed-rate loan commitments, fair value also
considers the difference between current levels of interest rates and
the committed rates. The fair value of letters of credit is based on
fees currently charged for similar agreements or on the estimated cost
to terminate them or otherwise settle the obligations with the
counterparties at the reporting date.
The following table presents estimated fair values of the Company's
financial instruments. The fair values of certain of these instruments
were calculated by discounting expected cash flows, which method
involves significant judgments by management and uncertainties. Fair
value is the estimated amount at which financial assets or liabilities
could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Because no market exists
for certain of these financial instruments and because management does
not intend to sell these financial instruments, the Company does not
know whether the fair values shown below represent values at which the
respective financial instruments could be sold individually or in the
aggregate.
<TABLE>
<CAPTION>
1993
----------------------------------------------
Carrying Amount Fair Value
--------------- ----------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 16,608,394 $ 16,608,000
Investment securities 57,077,737 57,400,000
Loans, net of allowance for loan losses 419,527,061 428,156,000
Accrued interest receivable 3,814,890 3,815,000
Financial liabilities:
Deposits 326,611,238 328,723,000
FHLB advances 114,923,356 118,017,000
Short-term borrowings 15,329,476 15,329,000
Unrecognized financial instruments (net of contractual value):
Commitments to extend credit -0- -0-
Standby letters of credit -0- -0-
Unused lines of credit -0- -0-
</TABLE>
NOTE 11: LEASES
The Savings Bank has entered into various operating leases at
seventeen of its branch locations. At June 30, 1993, minimum lease
payments are as follows:
1994 $ 105,188
1995 102,537
1996 102,537
1997 102,537
1998 102,537
Later Years 1,617,608
-------------
$ 2,132,944
============
Rental expense was $146,027, $155,076 and $137,518 for the years
ended June 30, 1993, 1992 and 1991, respectively.
NOTE 12: DEFINED BENEFIT PLAN
The Company participates in a multi-employer defined benefit plan
covering all employees who have met minimum service requirements. The
Company's policy is to fund pension cost accrued. No contribution was
required for the three years ended June 30, 1993. As a member of a
multi-employer pension plan, disclosures of plan assets and liabilities
for individual employers are not required or practicable.
NOTE 13: OFF-BALANCE SHEET AND CREDIT RISK
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since a
significant portion of the commitments may expire without being drawn
upon, the total commitment amounts do not necessarily represent future
cash requirements. The Savings Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by the Savings Bank upon extension of credit, is
based on management's credit evaluation of the counter party.
Collateral held varies but may include accounts receivable, inventory,
property, plant and equipment, commercial real estate and residential
real estate.
At June 30, 1993 and 1992, the Savings Bank had outstanding
commitments to originate loans and fund commercial construction
aggregating approximately $72,700,000 (including $39 million of
undisbursed loans in process) and $39,900,000. The commitments extend
over varying periods of time with the majority being disbursed within
a 30- to 180-day period. Loan commitments at fixed rates of interest
amounted to $6,300,000 and $3,352,000 with the remainder at floating
market rates at June 30, 1993 and 1992, respectively.
Letters of credit are conditional commitments issued by the Savings
Bank to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing and
similar transactions. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loans to
customers.
The Savings Bank had total outstanding letters of credit amounting
to $8,635,000 and $8,362,000 at June 30, 1993 and 1992, respectively,
with $474,500 and $201,500 of the letters of credit having terms
ranging from six months to five years at June 30, 1993 and 1992,
respectively. The remaining $8,160,500 at June 30, 1993 and 1992,
consisted of an outstanding letter of credit to guarantee the payment
of principal and interest on a Multifamily Housing Refunding Revenue
Bond issue. The Savings Bank has pledged investment securities to this
letter of credit as discussed in Note 2.
Lines of credit are agreements to lend to a customer as long as there
is no violation of any condition established in the contract. Lines of
credit generally have fixed expiration dates. Since a portion of the
line may expire without being drawn upon, the total unused lines do not
necessarily represent future cash requirements. The Savings Bank
evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary by the Savings
Bank upon extension of credit, is based on management's credit
evaluation of the counter party. Collateral held varies but may
include accounts receivable, inventory, property, plant and equipment,
commercial real estate and residential real estate. The Savings Bank
uses the same credit policies in granting lines of credit as it does
for on-balance sheet instruments.
At June 30, 1993, the Savings Bank had granted unused lines of credit
to borrowers aggregating approximately $4,600,000 and $1,950,000 for
commercial lines and open-end consumer lines, respectively. At June
30, 1992, the Savings Bank had granted unused lines of credit to
borrowers aggregating approximately $10,400,000 and $1,850,000 for
commercial lines and open-end consumer lines, respectively.
The Savings Bank grants collateralized commercial, real estate and
consumer loans primarily to customers in the southwest and central
portions of Missouri. Although the Savings Bank has a diversified
portfolio, loans (including loans in process) aggregating $54.1 million
and $28.8 million at June 30, 1993 and 1992, respectively, are secured
by motels, restaurants, recreational facilities and other commercial
properties in the Branson, Missouri, area. Residential mortgage and
consumer loans in the Branson, Missouri, area aggregated $48.3 million
and $39.4 million at June 30, 1993 and 1992, respectively. In
addition, construction loans in process at June 30, 1993, totaled $97.9
million or 23% of the Savings Bank's net loan portfolio. Approximately
88% of construction loans are multifamily and commercial properties.
NOTE 14: LITIGATION
GSBC and its subsidiaries are defendants in certain lawsuits arising
in the ordinary course of business. Management, after review with its
legal counsel, is of the opinion that the resolution of these legal
matters will not have a material adverse effect on the Company's
financial position.
NOTE 15: FUTURE CHANGES IN ACCOUNTING PRINCIPLE
The Financial Accounting Standards Board has adopted Statement No.
109, "Accounting for Income Taxes." This statement requires an asset
and liability approach to determining deferred income tax amounts and
income tax expense for the period. The Company expects to first apply
this statement during the fiscal year ending June 30, 1994. The impact
of this statement is expected to increase equity by approximately 6%.
The Financial Accounting Standards Board has adopted Statement No.
106, "Employers' Accounting for Post-Retirement Benefits Other Than
Pensions." This statement requires employers to use accrual accounting
for post-retirement benefits other than pensions, covering current and
former employees and their families. The Company expects to first
apply this statement in the fiscal year ending June 30, 1994. The
application of this statement is expected to have no effect on GSBC's
financial statements.
The Financial Accounting Standards Board has adopted Statement No.
114, "Accounting by Creditors for Impairment of a Loan." This
statement requires certain impaired loans to be measured based on the
present value of expected future cash flows. The Company expects to
first apply this statement in the fiscal year ending June 30, 1996.
The effect of this change in accounting principle has not been
determined.
The Financial Accounting Standards Board has adopted Statement No.
115, "Accounting for Certain Investments in Debt and Equity
Securities." This statement addresses accounting for an entity's held-
to-maturity securities, trading securities and available-for-sale
securities as well as establishes criteria for the various categories.
The Company expects to first apply this statement in the fiscal year
ending June 30, 1995. The effect of this change in accounting
principle has not been determined.
NOTE 16: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Noncash Investing and Financing Activities
- -------------------------------------------
Conversion of loans to foreclosed assets $557,573 $5,423,238 $8,957,177
Conversion of foreclosed assets to loans $6,242,975 $5,725,611 $3,737,507
Additional Cash Payment Information
- -----------------------------------
Interest paid $17,468,741 $22,703,781 $28,628,754
Income taxes paid $3,706,888 $2,312,000 $1,250,000
</TABLE>
NOTE 17: CONVERSION TO STOCK FORM OF OWNERSHIP
In connection with the conversion in December 1989, GSBC completed
the sale of 2,054,167 shares of its common stock (par value $.01) at an
initial public offering price of $9 per share. In the event of a
future liquidation of the Savings Bank (and only in such event),
eligible depositors who continue to maintain accounts shall be entitled
to receive a distribution from the liquidation account.
NOTE 18: EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
Effective upon the conversion, GSBC established an Employee Stock
Ownership Plan (ESOP) for full-time employees age 21 years or older who
have at least one year of credited service.
The ESOP borrowed funds from a third-party lender and used the
proceeds to purchase common stock. During 1991, the ESOP debt payable
to the third-party lender was refinanced by a loan payable to GSBC.
The debt is to be repaid in monthly amounts of $30,812 plus interest at
a rate of prime plus two percent and matures April 1, 1994. The loan
will be retired by contributions to the ESOP from the Savings Bank and
other subsidiaries. Shares purchased will be held in a suspense
account for allocation among members as the loan is paid.
Contributions to the ESOP and shares released from the suspense account
will be allocated among participants on the basis of compensation in
the year of allocation. Benefits become 100% vested after five years
of credited service. Forfeitures will be reallocated among remaining
participating employees. Benefits are payable upon retirement, early
retirement, disability or separation from service. Distributions may
be paid in shares of common stock or in cash.
The ESOP trustee must vote all allocated shares held in the ESOP in
accordance with the instructions of the participating employees.
Unallocated shares and shares held in the suspense account will be
voted pro rata based on the shares voted by the participating
employees.
Contribution expense was $404,608, $449,609 and $519,906 for the
years ended June 30, 1993, 1992 and 1991, respectively. Interest
incurred on ESOP debt was $34,864, $79,865 and $150,162 for the years
ended June 30, 1993, 1992 and 1991, respectively. Dividends declared
on ESOP shares were $69,925, $73,280 and $73,950 for the years ended
June 30, 1993, 1992 and 1991, respectively. The amounts contributed to
the ESOP for the years ended June 30, 1993, 1992 and 1991, were the
same as contribution expense for the same periods.
At June 30, 1993, the Internal Revenue Service (IRS) had determined
the ESOP qualifies under Section 401(a) of the Internal Revenue Code
and is, therefore, not subject to tax under present income tax
regulations.
NOTE 19: STOCK OPTION PLAN
Effective upon the conversion, the Board of Directors of the Company
established the 1989 Stock Option and Incentive Plan for employees and
directors of the Company and its subsidiaries. Under the plan, stock
options or awards may be granted with respect to 205,416 shares of
common stock.
Stock options may be either incentive stock options or nonqualified
stock options, and the option price must be at least equal to the fair
value of the Company's common stock on the date of grant. Options are
granted for a ten-year term and become exercisable in four cumulative
annual installments of 25% commencing two years from the date of grant.
The Stock Option Committee may accelerate a participant's right to
purchase shares under the plan.
Stock awards may be granted to key officers and employees upon terms
and conditions determined solely at the discretion of the Stock Option
Committee.
The table below summarizes transactions under the Company's stock
option plan:
<TABLE>
<CAPTION>
Shares
--------------------------------------
Available
to Grant Under Option
-------- ------------
<S> <C> <C>
Balance, July 1, 1990 ($9 per share) 67,578 107,838
Granted ($7.625 per share) (32,700) 32,700
Forfeited ($7.625 per share) 1,050 (1,050)
--------- ---------
Balance, June 30, 1991 ($7.625 - $9 per share) 35,928 139,488
Granted ($21 per share) (3,100) 3,100
Exercised ($9 per share) - (2,568)
Forfeited ($7.625 - $9 per share) 10,802 (10,802)
------- ----------
Balance, June 30, 1992 ($7.625 - $21 per share) 43,630 129,218
Granted ($30.125 per share) (2,000) 2,000
Exercised ($7.625 - $9 per share) - (10,730)
Forfeited ($7.625 - $9 per share) 5,499 (5,499)
-------- ----------
Balance, June 30, 1993 ($7.625 - $30.125 per share) 47,129 114,989
======== ==========
Options exercisable at June 30, 1993 50,043
======
</TABLE>
NOTE 20: SUMMARY OF UNAUDITED QUARTERLY OPERATING RESULTS
Following is a summary of unaudited quarterly operating results for
the years ended June 30, 1993 and 1992:
<TABLE>
<CAPTION>
1993
------------------------------------------------------------------------------------
Three Months Ended
------------------------------------------------------------------------------------
September 30 December 31 March 31 June 30
------------ ----------- -------- -------
<S> <C> <C> <C> <C>
Interest income $9,464,214 $9,256,891 $8,973,151 $9,467,446
Interest expense 4,605,562 4,007,152 4,024,099 4,172,797
Provision for loan losses 1,045,131 1,100,386 905,818 1,625,618
Net income 1,062,609 1,109,069 1,220,617 1,343,782
Earnings per common share $.60 $.65 $.72 $.80
</TABLE>
<TABLE>
<CAPTION>
1992
-----------------------------------------------------------------------------------
Three Months Ended
-----------------------------------------------------------------------------------
September 30 December 31 March 31 June 30
------------ ----------- -------- -------
<S> <C> <C> <C> <C>
Interest income $10,492,292 $9,975,147 $9,427,915 $9,128,029
Interest expense 6,231,034 5,851,027 5,135,506 4,918,857
Provision for loan losses 983,256 322,804 772,194 778,806
Net income 895,258 926,152 967,159 1,002,948
Earnings per common share $.47 $.50 $.53 $.56
</TABLE>
NOTE 21: CONDENSED PARENT COMPANY STATEMENTS
The condensed balance sheets at June 30, 1993 and 1992, and
statements of income and cash flows for the years ended June 30, 1993
and 1992, and the period ended June 30, 1991, for the parent company,
Great Southern Bancorp, Inc., are as follows:
<TABLE>
1993 1992
---- ----
<S> <C> <C>
BALANCE SHEETS
Assets
Cash $ 6,458,429 $ 5,893,332
Investment in subsidiaries 45,365,871 44,188,776
------------------ ------------------
$ 51,824,300 $ 50,082,108
================== ==================
Liabilities and Stockholders' Equity
Dividends and accounts payable $ 100,949 $ 203,207
Common stock 20,542 20,542
Additional paid-in capital 16,409,261 16,389,961
Retained earnings 42,842,136 38,688,681
Employee Stock Ownership Plan debt (223,588) (619,889)
Treasury stock, at cost (7,325,000) (4,600,394)
------------------ ------------------
$ 51,824,300 $ 50,082,108
================== ==================
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
STATEMENTS OF INCOME
Income
Dividends from subsidiaries $ 3,605,389 $ 3,603,202 $ 8,201,299
Gain on sale of foreclosed assets - 113,672 -
Interest income 167,496 253,120 167,175
------------ ----------- ------------
Total income 3,772,885 3,969,994 8,368,474
------------ ----------- ------------
Expense
Operating expenses 248,157 238,320 206,141
------------ ----------- ------------
Total expense 248,157 238,320 206,141
------------ ----------- ------------
Income before income tax and equity
in undistributed earnings of subsidiary 3,524,728 3,731,674 8,162,333
Provision (credit) for income taxes (54,254) 1,405 6,750
------------ ----------- ------------
Income before equity in
earnings of subsidiaries 3,578,982 3,730,269 8,155,583
Equity in undistributed earnings
of subsidiaries 1,157,095 61,248 (4,893,072)
------------ ----------- ------------
Net Income $ 4,736,077 $ 3,791,517 $ 3,262,511
============ =========== ============
STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities
Net income $ 4,736,077 $ 3,791,517 $ 3,262,511
Items not requiring (providing) cash
Equity in undistributed earnings
of subsidiaries (1,157,095) (61,248) -
Gain on sale of foreclosed assets - (113,672) -
Changes in:
ESOP debt 396,301 444,170 (1,064,059)
Prepaid expenses and other assets 9,310 8,619
Dividends and accounts payable (102,258) 47,899 (27,308)
------------ ----------- ------------
Net cash provided by
operating activities 3,873,025 4,117,976 2,179,763
------------ ----------- ------------
Cash Flows From Investing Activities
Dividends received from subsidiaries
in excess of current earnings - - 4,893,072
Acquisition of foreclosed assets - - (2,617,000)
Proceeds from sale of foreclosed assets - 2,730,672 -
Investment in Low Income Housing
Partnership (20,000) - -
------------ ----------- ------------
Net cash provided by (used in)
investing activities (20,000) 2,730,672 2,276,072
------------ ----------- ------------
Cash Flows From Financing Activities
Dividends paid (582,622) (626,938) (685,585)
Stock options exercised 109,366 23,112 -
Treasury stock purchased (2,814,672) (2,951,088) (1,669,229)
------------ ----------- ------------
Net cash used in
financing activities (3,287,928) (3,554,914) (2,354,814)
------------ ----------- ------------
Increase in Cash 565,097 3,293,734 2,101,021
Cash, Beginning of Year 5,893,332 2,599,598 498,577
------------ ----------- ------------
Cash, End of Year $ 6,458,429 $ 5,893,332 $ 2,599,598
============ =========== ============
Additional Cash Payment Information
Income taxes paid $27,659 $12,000 $-0-
</TABLE>
NOTE 22: SUBSEQUENT EVENT
On July 16, 1993, management of the Company, as authorized by the
Board of Directors of Great Southern Bancorp, Inc. (GSBC), signed a
letter of intent with Fourth Financial Corporation (Fourth), a Kansas-
based bank holding company with over $6 billion in total assets. The
letter of intent formulates a transaction whereby all of the
outstanding stock of GSBC would be exchanged for shares of Fourth in a
tax-free merger. GSBC and Fourth are negotiating a definitive merger
agreement which has not been signed. If the merger agreement is
signed, it is subject to regulatory and shareholder approval and, if
approved, is anticipated to occur in early 1994.
<TABLE>
<CAPTION>
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
December 31 June 30,
1993 1993
----- ----
ASSETS
<S> <C> <C>
Cash $ 4,000,818 $ 3,776,232
Interest-bearing deposits in financial institutions 10,895,358 12,832,162
----------- -----------
Cash and cash equivalents 14,896,176 16,608,394
Investment securities (fair value $50,900,000 -
December 1993; $57,400,000 - June 1993) 50,823,486 57,077,737
Loans receivable, net 437,496,851 419,527,061
Foreclosed assets held for sale, net 10,594,349 8,908,793
Premises and equipment 6,338,546 6,276,374
Accrued interest receivable
Loans 2,604,302 2,848,003
Investments 608,067 966,887
Prepaid expenses and other assets 2,190,673 1,723,871
Excess of cost over fair value of net assets
acquired 1,313,911 1,356,301
Deferred income taxes 3,824,000 0
----------- -----------
Total Assets $530,690,361 $515,293,421
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings Deposits $327,424,111 $326,611,238
Federal Home Loan Bank advances 116,293,184 114,923,356
Short-term borrowings 23,612,527 15,329,476
Advance payments by borrowers for taxes
and insurance 1,485,206 2,727,416
Accounts payable and accrued expenses 2,122,497 2,431,376
Income taxes payable 1,069,477 1,528,505
Deferred income 4,283 18,703
----------- -----------
Total Liabilities 472,011,285 463,570,070
----------- -----------
Capital stock
Serial preferred stock, $.01 par value;
authorized 1,000,000 shares
Common stock, $.01 par value; authorized
10,000,000 shares, issued 2,054,167 shares 20,542 20,542
Additional paid-in capital 16,569,261 16,409,261
Retained earnings - substantially restricted 49,272,251 42,842,136
Employee Stock Ownership Plan debt (31,166) (223,588)
Treasury stock, at cost; 441,074 shares -
December 1993; 460,688 shares - June 1993 (7,151,812) (7,325,000)
----------- -----------
Total Stockholders' Equity 58,679,076 51,723,351
----------- -----------
Total Liabilities and Stockholders' Equity $530,690,361 $515,293,421
=========== ===========
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $9,129,098 $8,149,658 $17,885,479 $16,423,841
Investment Securities 652,597 1,063,995 1,316,738 2,181,467
Other 27,351 43,238 56,720 115,797
--------- --------- ---------- ----------
9,809,046 9,256,891 19,258,937 18,721,105
--------- --------- ---------- ----------
INTEREST EXPENSE
Deposits 2,755,156 2,838,989 5,562,577 6,117,546
FHLBank advances 1,443,401 1,084,600 2,883,818 2,315,565
Short-term borrowings 124,606 83,563 211,790 179,603
--------- --------- ---------- ----------
4,323,163 4,007,152 8,658,185 8,612,714
--------- --------- ---------- ----------
NET INTEREST INCOME 5,485,883 5,249,739 10,600,752 10,108,391
PROVISION FOR LOAN LOSSES 1,220,900 1,100,386 2,685,936 2,145,517
--------- --------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,264,983 4,149,353 7,914,816 7,962,874
--------- --------- ---------- ----------
NON INTEREST INCOME
Commissions 898,869 810,852 1,808,007 1,646,508
Service charge fees 543,166 438,438 1,010,604 867,893
Profit on sale of loans 268,645 120,960 419,847 194,458
Income (expense) on foreclosed assets (247,872) (250,547) 76,856 (296,797)
Other income 431,791 366,705 864,368 663,342
--------- --------- ---------- ----------
1,894,599 1,486,408 4,179,682 3,075,404
--------- --------- ---------- ----------
NON INTEREST EXPENSE
Salaries and employee benefits 1,805,401 1,796,052 3,652,728 3,541,131
Net occupancy expense of premises 426,178 449,493 870,046 854,778
Postage 134,708 128,761 268,172 256,649
Insurance 308,445 285,380 595,716 576,581
Advertising 219,145 150,188 374,863 226,394
Office supplies and printing 128,546 101,055 224,487 223,644
Other expenses 712,375 700,962 1,307,458 1,152,123
--------- --------- ---------- ----------
3,734,798 3,611,891 7,293,470 6,831,300
--------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES 2,424,784 2,023,870 4,801,028 4,206,978
PROVISION FOR INCOME TAXES 756,700 914,800 1,602,000 2,035,300
--------- --------- ---------- ----------
INCOME BEFORE CUMULATIVE CHANGE IN
ACCOUNTING PRINCIPLE 1,668,084 1,109,070 3,199,028 2,171,678
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 0 0 3,375,000 0
--------- --------- ---------- ---------
NET INCOME $1,668,084 $1,109,070 $ 6,574,028 $ 2,171,678
========= ========= ========== ==========
EARNINGS PER COMMON SHARE:
Income Before Cumulative Effect of
Accounting Change $1.00 $.65 $1.91 $1.25
Cumulative Effect of Change in Accounting
for Income Taxes .00 .00 2.02 .00
---- --- ---- ----
Net Income $1.00 $.65 $3.93 $1.25
==== === ==== ====
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
DECEMBER 31,
1993 1992
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 6,574,028 $ 2,171,678
Items not requiring (providing) cash:
Depreciation 293,387 267,804
Amortization 42,390 42,390
Provision for loan losses 2,685,936 2,145,517
Provision for losses on foreclosed assets 500,000 257,000
Gain on sale of loans (419,847) (194,458)
FHLBank stock dividends received 0 (184,000)
(Gain) loss on sale of premises and equipment (175,835) (682)
Gain on sale of foreclosed assets (484,262) (75,440)
Amortization of deferred income,
premiums and discounts (353,928) 155,552
Loss on investment securities 8,444 0
Cumulative effect of change in accounting for
income taxes (3,375,000) 0
Deferred income taxes (824,000) 0
Changes in:
Accrued interest receivable 602,521 238,890
Prepaid expenses and other assets (466,802) (200,284)
Accounts payable and accrued expenses (308,879) (247,301)
ESOP debt 192,422 200,224
Income taxes payable (84,028) 365,988
----------- -----------
Net cash provided by operating activities 4,406,547 4,942,878
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans (22,167,710) (18,338,295)
Purchase of loans 0 (1,422,606)
Purchase of premises and equipment (546,369) (337,017)
Proceeds from sale of premises and equipment 366,645 12,280
Proceeds from sale of foreclosed assets 993,465 407,355
Capitalized costs on foreclosed assets (28,130) (2,152,073)
Proceeds from maturing investment securities 10,102,870 13,802,455
Purchase of investment securities (4,252,353) (11,910,383)
----------- -----------
Net cash used in
investing activities (15,531,582) (19,938,284)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net purchase (redemption) of certificates of deposit (2,050,462) (32,234,420)
Net increase in checking and savings 2,863,335 6,375,503
Proceeds from FHLBank advances 69,552,413 68,401,500
Repayments of FHLBank advances (68,182,585) (35,622,914)
Net increase in short-term borrowings 8,283,051 (2,819,969)
Advances from borrowers for taxes and insurance (1,242,210) (1,097,963)
Purchase of treasury stock 0 (1,681,038)
Dividends paid (143,913) (294,758)
Stock options exercised 333,188 0
----------- -----------
Net cash provided by financing activities 9,412,817 1,025,941
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (1,712,218) (13,969,465)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 16,608,394 26,559,576
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,896,176 $ 12,590,111
=========== ===========
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
GREAT SOUTHERN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for
the three month periods and six month periods ended December 31, 1993
and 1992 are not necessarily indicative of the results that may be
expected for the full year. For further information, refer to the
consolidated financial statements and footnotes thereto included in
the Company's annual report Form 10-K for the year ended June 30,
1993.
When necessary, reclassifications have been made to prior
period balances to conform to current period presentation. These
reclassifications had no effect on net income.
NOTE 2: EARNINGS PER SHARE
Earnings per share is based on the weighted average number of
common and common equivalent shares outstanding during the period
less the weighted average number of shares of treasury stock.
Such average shares include the weighted average number of
common shares considered outstanding, plus the shares issuable, upon
exercise of stock options after the assumed repurchase of common
shares with the related proceeds as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1993 1992 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted Average Number of
Common Shares 1,599,545 1,635,028 1,598,934 1,655,690
Shares Issuable
Primary 73,377 77,210 72,603 76,795
Fully Diluted 73,815 77,573 73,815 77,573
</TABLE>
ANNEX I
AGREEMENT AND PLAN OF REORGANIZATION
among
FOURTH FINANCIAL CORPORATION,
FIRST DODGE CITY BANCSHARES, INC.,
FIRST NATIONAL BANCSHARES OF DODGE CITY, INC.,
METRO BANCSHARES, INC.,
METRO BANK OF BROKEN ARROW,
FIRST NATIONAL BANK AND TRUST COMPANY IN DODGE CITY
and
THE STOCKHOLDERS OF
FIRST DODGE CITY BANCSHARES, INC.
Dated as of February 2, 1994
TABLE OF CONTENTS
Page No.
--------
ARTICLE I. Definitions . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . 2
Section 1.2 Accounting Terms. . . . . . . . . . . . . . . . 9
Section 1.3 Use of Defined Terms. . . . . . . . . . . . . . 9
ARTICLE II. Plan of Reorganization. . . . . . . . . . . . . 9
Section 2.1 Tax-Free Reorganizations. . . . . . . . . . . . 9
Section 2.2 Agreements of Fourth. . . . . . . . . . . . . . 10
Section 2.3 Agreements of First Dodge, FNB, MBI, the Banks,
and the Stockholders. . . . . . . . . . . . . . 12
Section 2.4 The Mergers . . . . . . . . . . . . . . . . . . 17
Section 2.5 Conversion and Exchange of Shares . . . . . . . 19
Section 2.6 Advance Preparations for Bank Mergers . . . . . 22
ARTICLE III. Representations and Warranties. . . . . . . . . 22
Section 3.1 Representation and Warranties of First Dodge,
FNB, MBI, the Banks, and the Stockholders . . . 22
Section 3.2 Representations and Warranties of
Fourth. . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV. Securities Laws Matters . . . . . . . . . . . . 37
Section 4.1 Registration Statement and Proxy
Statement . . . . . . . . . . . . . . . . . . . 37
Section 4.2 State Securities Laws . . . . . . . . . . . . . 38
Section 4.3 Affiliates. . . . . . . . . . . . . . . . . . . 38
ARTICLE V. Closing Conditions. . . . . . . . . . . . . . . 39
Section 5.1 Conditions to Obligations of Fourth,
BANK IV Kansas, and BANK IV Oklahoma. . . . . . 39
Section 5.2 Conditions to Obligations of First Dodge,
FNB, MBI, the Banks, and the Stockholders . . . 41
ARTICLE VI. Effective Time. . . . . . . . . . . . . . . . . 42
ARTICLE VII. Termination of Agreement. . . . . . . . . . . . 43
Section 7.1 Mutual Consent; Absence of Stockholder
Approval; Termination Date. . . . . . . . . . . 43
Section 7.2 Election by Fourth. . . . . . . . . . . . . . . 43
Section 7.3 Election by First Dodge . . . . . . . . . . . . 44
ARTICLE VIII.Indemnification . . . . . . . . . . . . . . . . . 44
Section 8.1 Effect of Closing . . . . . . . . . . . . . . . 44
Section 8.2 General Indemnification . . . . . . . . . . . . 45
Section 8.3 Procedure . . . . . . . . . . . . . . . . . . . 45
Section 8.4 Survival of Representations and
Warranties. . . . . . . . . . . . . . . . . . . 46
Section 8.5 Several Liability of Stockholders . . . . . . . 46
Section 8.6 Indemnification Payments. . . . . . . . . . . . 47
ARTICLE IX. Miscellaneous . . . . . . . . . . . . . . . . . 47
Section 9.1 Expenses. . . . . . . . . . . . . . . . . . . . 47
Section 9.2 Affiliates' Agreements. . . . . . . . . . . . . 47
Section 9.3 Notices . . . . . . . . . . . . . . . . . . . . 47
Section 9.4 Stockholders' Agreements. . . . . . . . . . . . 47
Section 9.5 Power of Attorney . . . . . . . . . . . . . . . 48
Section 9.6 Time. . . . . . . . . . . . . . . . . . . . . . 49
Section 9.7 Law Governing . . . . . . . . . . . . . . . . . 49
Section 9.8 Entire Agreement; Amendment . . . . . . . . . . 49
Section 9.9 Successors and Assigns. . . . . . . . . . . . . 49
Section 9.10 Cover, Table of Contents, and
Headings. . . . . . . . . . . . . . . . . . . . 49
Section 9.11 Counterparts. . . . . . . . . . . . . . . . . . 49
EXHIBITS
Exhibit "A" . . . . . Form of BANK IV Kansas Merger Agreement
Exhibit "B" . . . . . Form of BANK IV Oklahoma Merger
Agreement
Exhibit "C" . . . . . Form of Fourth Merger
Agreement
Exhibit "D" . . . . . Form of Mangan, Dalton, Trenkle, Rebein
& Doll, Chartered legal opinion
[OMITTED]
Exhibit "E" . . . . . Form of Consulting and Marketing
Agreement
Exhibit "F" . . . . . Form of Foulston & Siefkin legal
opinion
[OMITTED]
Exhibit "G" . . . . . Form of Affiliate's Agreement
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of
February 2, 1994, among FOURTH FINANCIAL CORPORATION, a Kansas
corporation ("Fourth"); FIRST DODGE CITY BANCSHARES, INC., a Kansas
corporation ("First Dodge"); FIRST NATIONAL BANCSHARES OF DODGE
CITY, INC., a Kansas corporation ("FNB"); METRO BANCSHARES, INC.,
an Oklahoma corporation ("MBI"); FIRST NATIONAL BANK AND TRUST
COMPANY IN DODGE CITY, a national banking association ("First
National"); METRO BANK OF BROKEN ARROW, an Oklahoma banking
corporation ("Metro Bank"); and the stockholders of First Dodge
("Stockholders").
W I T N E S S E T H: That,
-------------------
WHEREAS, Fourth is a bank holding company engaged in the
business of owning and operating banks located in the States of
Kansas and Oklahoma; and
WHEREAS, Fourth desires to acquire all, and not less than
all, of the assets of First Dodge and MBI and all of the issued and
outstanding capital stock of all classes of First Dodge's and MBI's
direct and indirect subsidiaries, subject to and pursuant to the
terms of this Agreement; and
WHEREAS, each party hereto believes that the proposed
acquisition by Fourth of First Dodge, MBI, and their subsidiaries
pursuant to the terms and conditions of this Agreement would be
desirable and in their respective best interests and those of their
respective stockholders;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. The following terms as used in this
Agreement shall have the following meanings unless the context
otherwise requires:
"Affiliate" has the same meaning as in Rules 145 and 405
adopted under the Securities Act by the SEC, as the same may be
amended from time to time.
"This Agreement" refers to this Agreement and Plan of
Reorganization and all amendments hereto.
"BANK IV Kansas" means BANK IV Kansas, National
Association, a national banking association.
"BANK IV Kansas Merger" means the merger of First
National into BANK IV Kansas pursuant to the BANK IV Kansas Merger
Agreement.
"BANK IV Kansas Merger Agreement" means the Agreement to
Merge, substantially in the form of Exhibit "A" hereto, pursuant to
which the BANK IV Kansas Merger will be effected.
"BANK IV Oklahoma" means BANK IV Oklahoma, National
Association, a national banking association.
"BANK IV Oklahoma Merger" means the merger of Metro Bank
into BANK IV Oklahoma pursuant to the BANK IV Oklahoma Merger
Agreement.
"BANK IV Oklahoma Merger Agreement" means the Agreement
to Merge, substantially in the form of Exhibit "B" hereto, pursuant
to which the BANK IV Oklahoma Merger will be effected.
"Bank Holding Company Act" means the federal Bank Holding
Company Act of 1956, as amended (12 U.S.C. Section 1841 et seq.),
or any successor federal statute, and the rules and regulations of
the Board promulgated thereunder, all as the same may be in effect
at the time.
"Bank Mergers" refers collectively to the BANK IV Kansas
Merger and the BANK IV Oklahoma Merger.
"Bank Merger Agreements" refers collectively to the BANK
IV Kansas Merger Agreement and the BANK IV Oklahoma Merger
Agreement.
"Banks" refers collectively to First National and Metro
Bank and "Bank" refers to either one of them.
"Best Efforts" does not include those actions which are
not commercially reasonable under the circumstances.
"Board" means the Board of Governors of the Federal
Reserve System or any successor governmental entity which may be
granted powers currently exercised by the Board of Governors.
"Closing" means the consummation of the Mergers as
provided in this Agreement.
"Closing Price" means the closing price of Fourth Stock
on the trading day two trading days prior to the Effective Time as
reported in the Southwest Edition of The Wall Street Journal.
"Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder, all
as the same may be in effect at the time.
"Comptroller" means the United States Comptroller of the
Currency or any successor governmental agency which may be granted
powers currently exercised by the Comptroller of the Currency.
"Corporations" refers collectively to First Dodge, FNB,
MBI, the Banks, and their respective Subsidiaries.
"Disclosure Statement" means the Disclosure Statement
prepared by First Dodge, FNB, MBI, the Banks, and the Stockholders
and delivered by them to Fourth prior to the execution and delivery
of this Agreement by Fourth.
"Effective Time" means the date and time on which the
Mergers are effective as more fully defined in this Agreement.
"Environmental, Health, and Safety Liabilities" means any
loss, cost, expense, claim, demand, liability, or obligation of
whatever kind or otherwise, based upon any Environmental, Health,
and Safety Law relating to:
(i) any environmental, health, or safety matter
or conditions, including, but not limited to, on-site or
off-site contamination, occupational safety and health,
and regulation of chemical substances or products;
(ii) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings,
damages, losses, claims, demands, and response, remedial
or inspection costs and expenses arising under any
Environmental, Health, and Safety Law;
(iii) financial responsibility under any
Environmental Law for cleanup costs or corrective
actions, including for any removal, remedial or other
response actions, and for any natural resource damage;
and
(iv) any other compliance, corrective, or remedial
action required under any Environmental, Health, and
Safety Law.
"Environmental, Health, and Safety Law" means any
provision of past or present Law relating to any environmental,
health, or safety matters or conditions, Hazardous Materials,
pollution, or protection of the environment, including, but not
limited to, on-site and off-site contamination, occupational safety
and health, and regulation of chemical substances or products,
emissions, discharges, release, or threatened release of
contaminants, chemicals or industrial, toxic, radioactive, or
Hazardous Materials or wastes into the environment, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of Hazardous
Materials, pollutants, contaminants, chemicals, or industrial,
toxic, radioactive, or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated
thereunder, all as the same may be in effect at the time.
"Federal Deposit Insurance Act" means the Federal Deposit
Insurance Act, as amended, and the rules and regulations
promulgated thereunder, all as the same may be in effect at the
time.
"FDIC" means the Federal Deposit Insurance Corporation or
any successor agency.
"Financial Statements" refers to all of the financial
statements described in clause g of Section 3.1 of this Agreement
and clause i of Section 2.3 of this Agreement.
"First Dodge" means First Dodge City Bancshares, Inc., a
Kansas corporation and a party to this Agreement.
"First Dodge Stock" means the common stock, par value
$1.00 per share, of First Dodge.
"First National" means First National Bank and Trust
Company in Dodge City, a national banking association and a party
to this Agreement.
"First National Stock" means the common stock of First
National, par value $100 per share.
"FNB" means First National Bancshares of Dodge City,
Inc., a Kansas corporation and a party to this Agreement.
"FNB Common Stock" means the common stock of FNB, par
value $1.00 per share.
"FNB Preferred Stock" means the preferred stock of FNB,
par value $1.00 per share.
"Fourth" means Fourth Financial Corporation, a Kansas
corporation and a party to this Agreement.
"Fourth Merger" means the merger of First Dodge, MBI, and
FNB into Fourth pursuant to the Fourth Merger Agreement.
"Fourth Merger Agreement" means the Agreement of Merger,
substantially in the form of Exhibit "C" hereto, pursuant to which
the Fourth Merger will be effected.
"Fourth Stock" means the common stock of Fourth, par
value $5 per share.
"GAAP" means generally accepted accounting principles,
applied on a consistent basis, set forth in Opinions of the
Accounting Principles Board of the American Institute of Certified
Public Accountants and/or in statements of the Financial Accounting
Standards Board and/or their successors which are applicable in the
circumstances in question; and the requisite that such principles
be applied on a consistent basis means that the accounting
principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
"Hazardous Materials" means and includes: (i) any
hazardous substance or toxic material (excluding any lawful product
for use in the ordinary course of such Bank's business which
contains such substance or material), pollutant, contaminant, toxic
material, or hazardous waste as defined in any federal, state, or
local environmental Law; (ii) waste oil and petroleum products; and
(iii) any asbestos, asbestos containing material, urea formaldehyde
or material which contains it.
"Law" or "Laws" means all applicable statutes, laws,
ordinances, regulations, orders, writs, injunctions, or decrees of
the United States of America, any state or commonwealth, or any
subdivision thereof, or of any court or governmental department,
agency, commission, board, bureau, or other instrumentality.
"Litigation" means any proceeding, claim, lawsuit, and/or
investigation being conducted or, to the best of the knowledge of
the person or corporation making the representation, threatened
before any court or other tribunal, including, but not limited to,
proceedings, claims, lawsuits, and/or investigations, under or
pursuant to any occupational safety and health, banking, antitrust,
securities, tax, or other Laws, or under or pursuant to any
contract, agreement, or other instrument.
"MBI" means Metro Bancshares, Inc., an Oklahoma
corporation and a party to this Agreement.
"MBI Common Stock" means the common stock of MBI, par
value $.10 per share.
"MBI Preferred Stock" means the preferred stock of MBI,
par value $1.00 per share.
"Merger Agreements" collectively refers to the three
merger agreements provided for in this Agreement pursuant to which
all of the three Mergers will be accomplished.
"Mergers" collectively refers to all three of the mergers
provided for in this Agreement.
"Metro Bank" means Metro Bank of Broken Arrow, an
Oklahoma banking corporation and a party to this Agreement.
"Metro Stock" means the common stock of Metro Bank, par
value $2.50 per share.
"Occupied Properties" means the parcels of real property
owned or leased by a Bank on which such Bank conducts or has
conducted operations, all of which are described in Schedule H to
the Disclosure Statement under the caption "Bank Occupied
Properties".
"Permitted Contract" means a contract or agreement,
written or oral, between a Bank, on the one hand, and a person
other than a customer of such Bank or another financial
institution, on the other hand, which (i) was entered into in the
ordinary course of business, (ii) may be terminated by Fourth or
BANK IV Kansas or BANK IV Oklahoma, as the case may be, after the
Effective Time on no more than 30 days prior notice, (iii) provides
for a payment of no more than $5,000 in any calendar month by such
Bank, and (iv) provides for no payment upon termination in excess
of $5,000.
"Permitted Encumbrances" mean with respect to any asset:
(a) liens for taxes not past due;
(b) mechanics' and materialmen's liens for
services or materials for which payment is not past due;
and
(c) minor defects, encumbrances, and
irregularities in title which do not, in the aggregate,
materially diminish the value of a property or materially
impair the use of a property for the purposes for which
it is or may reasonably be expected to be held.
"Proxy Statement" means the joint proxy statement to be
used in connection with the special stockholders' meetings of First
Dodge, First National, and MBI to be called for the purpose of
considering and voting upon the Mergers.
"Registration Statement" means the registration statement
on Form S-4 to be filed by Fourth with the SEC pursuant to the
Securities Act in connection with the registration of the shares of
Fourth Stock to be issued in connection with the Fourth Merger and
the BANK IV Kansas Merger.
"Required Approvals" means the approval, consent, or non-
objection, as the case may be, of the Board, the Comptroller, and
all other governmental or self-governing agencies, boards,
departments, and bodies whose approval, consent, or non-action is
required in order to consummate the Mergers, and each of them, and
the retention of all of the Banks' Subsidiaries in substantially
their present form, which approvals, consents, and non-objections
shall have become final and nonappealable without any appeal or
other form of review having been initiated and as to which all
required waiting periods shall have expired.
"SEC" means the United States Securities and Exchange
Commission or any other governmental entity which may be granted
powers currently being exercised by the Securities and Exchange
Commission.
"Securities Act" means the federal Securities Act of
1933, as amended, or any successor federal statute, and the rules
and regulations promulgated thereunder, all as the same shall be in
effect at the time.
"Stockholders" refers collectively to the three persons
executing this Agreement as "Stockholders", and "Stockholder"
refers to any one of them.
"Subsidiary" means any corporation fifty percent or more
of the common stock or other form of equity of which shall be
owned, directly or indirectly, by another corporation.
1.2. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP consistent with that applied in the preparation of the
financial statements submitted pursuant to this Agreement, and all
financial statements submitted pursuant to this Agreement shall be
prepared in all material respects in accordance with such
principles.
1.3. Use of Defined Terms. All terms defined in this
Agreement shall have the defined meanings when used in the Merger
Agreements, or any other agreement, document, or certificate made
or delivered pursuant to this Agreement, unless the context
otherwise requires.
ARTICLE II
PLAN OF REORGANIZATION
2.1. Tax-Free Reorganizations. It is the intention of
the parties that the Mergers contemplated by this Agreement and the
Merger Agreements shall qualify as tax-free reorganizations under
Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code.
2.2. Agreements of Fourth.
a. Fourth shall cause BANK IV Kansas and BANK IV
Oklahoma to execute and deliver the Bank Merger Agreement
to which it is a party. Fourth has approved and adopted
this Agreement and the Fourth Merger Agreement in
accordance with the applicable Laws of the United States
of America and the State of Kansas. Fourth, as sole
shareholder of BANK IV Kansas, shall vote all of the
stock of BANK IV Kansas in favor of the BANK IV Kansas
Merger Agreement and, together with its wholly owned
subsidiary, shall vote or cause to be voted all of the
stock of BANK IV Oklahoma in favor of the approval and
adoption of the Bank IV Oklahoma Merger Agreement.
Subject to the terms and conditions contained in this
Agreement, upon receipt of all of the Required Approvals,
Fourth shall cause BANK IV Kansas and BANK IV Oklahoma to
perform the Bank Merger Agreements.
b. Fourth shall cause all necessary action to be
taken to authorize the issuance of the number of shares
of Fourth Stock to be issued in the Fourth Merger and the
BANK IV Kansas Merger.
c. Prior to the Effective Time, Fourth,
separately and with the other parties hereto, shall use,
and cause BANK IV Kansas and BANK IV Oklahoma to use,
their Best Efforts in good faith to take or cause to be
taken as promptly as practicable all such steps as shall
be necessary to obtain all of the Required Approvals, and
shall do any and all acts and things reasonably deemed by
Fourth or the Corporations to be necessary or appropriate
in order to cause the Mergers to be consummated on the
terms provided herein and in the Merger Agreements as
promptly as practicable.
d. On or prior to the Effective Time, as
appropriate for the transactions contemplated hereby,
Fourth, BANK IV Kansas, and BANK IV Oklahoma shall
execute and deliver the Merger Agreements and the other
closing documents provided for in this Agreement, shall
take all such other actions as are required or desirable
to effect the Mergers, and shall utilize their Best
Efforts to cause all of the conditions described in
Section 5.2 of this Agreement to occur and be continuing,
and to consummate all of the other transactions
contemplated hereby.
e. Prior to the Effective Time, Fourth shall, to
the extent permitted by Law and outstanding
confidentiality agreements, give First Dodge and its
counsel and accountants full access, during normal
business hours and upon reasonable notice, to its
respective properties, books, and records, and shall
furnish First Dodge during such period with all such
information concerning its affairs as First Dodge may
reasonably request. The availability or actual delivery
of information about Fourth to First Dodge shall not
affect the covenants, representations, and warranties of
Fourth contained in this Agreement; provided, that First
Dodge shall promptly disclose to Fourth any apparent
breaches of such covenants, representations, or
warranties discovered by it prior to the Effective Time.
Except for information disclosed in the Registration
Statement or as otherwise required to be disclosed in the
course of obtaining governmental approvals, First Dodge
shall treat as confidential all such information in the
same manner as First Dodge treats similar confidential
information of its own and, if this Agreement is
terminated, First Dodge shall continue to treat all such
information obtained in such investigation and not
otherwise known to First Dodge from a source not known to
First Dodge to be under a confidential relationship with
Fourth, or already in the public domain, as confidential
and shall return such documents theretofore delivered by
Fourth to First Dodge as Fourth shall request.
f. On or before the Effective Time, BANK IV
Kansas shall replace and refinance First Dodge's existing
credit facilities with Commerce Bank, N.A. on terms no
less favorable to First Dodge than those currently
provided by Commerce Bank.
g. On or before the Effective Time, Thomas P.
Shirley and John V. Harding may each purchase from First
Dodge the policies of life insurance on their respective
lives for a cash purchase price equal to the then current
cash surrender value of the policy or policies being
purchased.
h. Fourth shall provide directors' and officers'
liability insurance coverage for the directors and
officers of the Corporations substantially similar to
that currently in effect, or continue such insurance, for
a period of two years from the Effective Time.
2.3. Agreements of First Dodge, FNB, MBI, the Banks,
and the Stockholders.
a. Prior to the consummation of the Mergers,
none of the Corporations shall, except with the prior
written consent of Fourth or as otherwise provided in
this Agreement or the Merger Agreements:
(1) Amend its articles of association,
articles of incorporation, bylaws, or other
charter documents, or make any change in its
authorized, issued, or outstanding capital stock,
grant any stock options or right to acquire
shares of any class of its capital stock or any
security convertible into any class of capital
stock, purchase, redeem, retire, or otherwise
acquire any shares of any class of its capital
stock or any security convertible into any class
of its capital stock, or agree to do any of the
foregoing;
(2) Declare, set aside, or pay any
dividend or other distribution in respect of any
class of its capital stock, except that First
Dodge, MBI, and First National shall each pay
cash dividends in an aggregate per share amount
equal to the product of (a) the cash dividends
paid on a share of Fourth Stock to Fourth
stockholders of record between November 15, 1993
and the Effective Time multiplied by (b) the
number of shares of Fourth Stock to be issued per
share of common stock of First Dodge, MBI, and
First National, respectively, in the Fourth
Merger and BANK IV Kansas Merger;
(3) Adopt, enter into, or amend materially
any employment contract or any bonus, stock
option, profit sharing, pension, retirement,
incentive, or similar employee benefit program or
arrangement or grant any salary or wage increase
except (a) normal individual increases in
compensation to employees in accordance with
established employee procedures of the
Corporations; and (b) the Fourth Financial
Corporation Acquisition Severance Schedule
previously furnished to First Dodge;
(4) Incur any indebtedness for borrowed
money (except for federal funds, repurchase
agreements entered into in the ordinary and usual
course of business, deposits received by a Bank,
endorsement, for collection or deposit, of
negotiable instruments received in the ordinary
and usual course of business, and issuance of
letters of credit by a Bank in the ordinary and
usual course of business), assume, guarantee,
endorse, or otherwise as an accommodation become
liable or responsible for obligations of any
other individual, firm, or corporation;
(5) Pay or incur any obligation or
liability, absolute or contingent, other than
liabilities incurred in the ordinary and usual
course of business of the Corporations;
(6) Except for transactions in the
ordinary and usual course of business of the
Banks or for Permitted Encumbrances, mortgage,
pledge, or subject to lien or other encumbrance
any of its properties or assets;
(7) Except for transactions in the
ordinary and usual course of business of the
Banks (including, without limitation, sales of
assets acquired by a Bank in the course of
collecting loans) sell or transfer any of its
properties or assets or cancel, release, or
assign any indebtedness owed to it or any claims
held by it;
(8) Make any investment of a capital
nature in excess of $25,000 for any one item or
group of similar items either by the purchase of
stock or securities (not including bonds
purchased in the ordinary and usual course of
business by the Banks), contributions to capital,
property transfers, or otherwise, or by the
purchase of any property or assets of any other
individual, firm, or corporation;
(9) Enter into any other agreement not in
the ordinary and usual course of business;
(10) Merge or consolidate with any other
corporation, acquire any stock (except in a
fiduciary capacity), solicit any offers for any
class of its capital stock or a substantial
portion of the assets of any of the Corporations
or, except in the ordinary course of business,
acquire any assets of any other person,
corporation, or other business organization, or
enter into any discussions with any person
concerning, or agree to do, any of the foregoing;
or
(11) Enter into any transaction or take any
action which would, if effected prior to the
Effective Time, constitute a breach of any of the
representations, warranties, or covenants
contained in this Agreement.
b. Prior to the Effective Time, each of the
Corporations shall conduct its respective business in the
ordinary and usual course as heretofore conducted,
including maintaining its current policies and procedures
regarding the review, approval, and collection of loans,
and, each of the Corporations shall use its best efforts
(1) to preserve its business and business organization
intact, (2) to keep available to Fourth, BANK IV Kansas,
and BANK IV Oklahoma the services of its present officers
and employees, (3) to preserve the good will of customers
and others having business relations with it, (4) to
maintain its properties in customary repair, working
order, and condition (reasonable wear and tear excepted),
(5) to comply with all Laws applicable to it and the
conduct of its business, (6) to keep in force at not less
than their present limits all existing policies of
insurance, (7) to make no material changes in the
customary terms and conditions upon which it does
business, (8) to duly and timely file all reports, tax
returns, and other documents required to be filed with
federal, state, local, and other authorities, and (9)
unless it is contesting the same in good faith and has
established reasonable reserves therefor, to pay when
required to be paid all taxes indicated by tax returns so
filed or otherwise lawfully levied or assessed upon it or
any of its properties and to withhold or collect and pay
to the proper governmental authorities or hold in
separate bank accounts for such payment all taxes and
other assessments which it believes in good faith to be
required by law to be so withheld or collected.
c. Prior to the Effective Time, the Corporations
shall, to the extent permitted by Law, give Fourth and
its counsel and accountants full access, during normal
business hours and upon reasonable notice, to their
respective properties, books, and records, and shall
furnish Fourth during such period with all such
information concerning their affairs as Fourth may
reasonably request. The availability or actual delivery
of information about the Corporations to Fourth shall not
affect the covenants, representations, and warranties of
the Corporations and the Stockholders contained in this
Agreement or the Merger Agreements except as provided in
Section 8.1 hereof; provided, that Fourth shall promptly
disclose to First Dodge and the Stockholders any apparent
breaches of such covenants, representations, or
warranties discovered by it prior to the Effective Time.
Except for confidential information disclosed in the
Registration Statement or as otherwise required to be
disclosed in the course of obtaining governmental
approvals, Fourth shall treat as confidential all
confidential information in the same manner as Fourth
treats similar confidential information of its own and,
if this Agreement is terminated, Fourth shall continue to
treat all such information obtained in such investigation
and not otherwise known to Fourth from a source not known
to Fourth to be under a confidential relationship with
the Corporations, or already in the public domain, as
confidential and shall return such documents theretofore
delivered by the Corporations to Fourth as the
Corporations shall request.
d. First Dodge, MBI, FNB, and the Banks shall
each cause this Agreement and the Merger Agreements to be
submitted promptly to their respective stockholders for
approval, adoption, ratification, and confirmation at
meetings to be called and held in accordance with the
applicable Law and their respective articles of
incorporation or association and bylaws. The respective
boards of directors of First Dodge, FNB, MBI, and the
Banks shall at all times prior to the Effective Time,
recommend that the Merger Agreements be approved,
ratified, and confirmed, and as of the date hereof, by
authorizing the execution of this Agreement, the boards
of directors of First Dodge, FNB, MBI, and the Banks do
hereby recommend such approval, adoption, ratification,
and confirmation.
e. First Dodge, FNB, MBI, and the Banks shall
separately and jointly with each other and with Fourth,
BANK IV Kansas, and BANK IV Oklahoma, each use its Best
Efforts in good faith to take or cause to be taken as
promptly as practicable all such steps as shall be
necessary to obtain all of the Required Approvals, and
shall do any and all acts and things reasonably deemed by
Fourth or the Corporations to be necessary or appropriate
in order to cause the Mergers to be consummated on the
terms provided herein and in the Merger Agreements as
promptly as practicable.
f. On or prior to the Effective Time, as
appropriate for the transactions contemplated hereby,
First Dodge, FNB, MBI, and the Banks shall each execute
and deliver the Merger Agreements and the other closing
documents provided for in this Agreement, shall take all
such other actions required or desirable in order to
effect the Mergers, and shall utilize their best efforts
to cause all of the conditions described in Section 5.1
of this Agreement to occur and be continuing, and to
consummate all of the other transactions contemplated
hereby.
g. On or prior to the Effective Time, First
Dodge shall exert its Best Efforts to cause First
National to enter into a contract with John V. Harding
substantially in the form of Exhibit "E" hereto.
h. The Corporations shall cooperate with Fourth
in Fourth's efforts to obtain current title evidence or
insurance, environmental assessment reports, and surveys
on such of the Corporations' real estate as Fourth may
desire.
i. First Dodge shall engage an independent
auditing firm to audit the 1993 consolidated financial
statements of First Dodge and shall deliver a copy of
same to Fourth upon its completion but no later than
February 10, 1994.
j. From the date hereof through the Effective
Time, Metro Bank and First National shall give Robert W.
Peterson, Assistant Vice President, BANK IV Kansas (or
such other person as may be designated by Fourth in
writing) at least one business day advance oral notice of
all proposed securities purchases or sales involving an
aggregate price of $250,000 or more.
2.4. The Mergers.
a. At the Effective Time, the BANK IV Kansas
Merger, the BANK IV Oklahoma Merger, and the Fourth
Merger shall occur simultaneously pursuant to the Merger
Agreements. The BANK IV Kansas Merger Agreement, the
BANK IV Oklahoma Merger Agreement, and the Fourth Merger
Agreement shall be substantially in the form of Exhibits
"A", "B", and "C" to this Agreement, respectively, with
such immaterial changes thereto as may be required or
desirable in order to obtain the required governmental
approvals and with all blanks properly completed.
b. As the result of the BANK IV Kansas Merger,
the separate existence of First National shall cease and
BANK IV Kansas, as the surviving association, shall
continue its corporate existence under the laws of the
United States; the existing articles of association of
BANK IV Kansas and the bylaws of BANK IV Kansas shall be
the articles of association and bylaws of the merged
bank; the directors and officers of BANK IV Kansas
immediately preceding the BANK IV Kansas Merger shall be
the directors and officers of the merged bank; BANK IV
Kansas shall possess all the rights, privileges, powers,
and franchises of First National; all property, real,
personal, and mixed, belonging to First National shall be
vested in and belong to BANK IV Kansas; and all rights of
creditors and depositors of First National shall continue
unimpaired.
c. As the result of the BANK IV Oklahoma Merger,
the separate existence of Metro Bank shall cease and BANK
IV Oklahoma, as the surviving association, shall continue
its corporate existence under the laws of the United
States; the existing articles of association of BANK IV
Oklahoma and the bylaws of BANK IV Oklahoma shall be the
articles of association and bylaws of the merged bank;
the directors and officers of BANK IV Oklahoma
immediately preceding the BANK IV Oklahoma Merger shall
be the directors and officers of the merged bank; BANK IV
Oklahoma shall possess all the rights, privileges,
powers, and franchises of Metro Bank; all property, real,
personal, and mixed, belonging to Metro Bank shall be
vested in and belong to BANK IV Oklahoma; and all rights
of creditors and depositors of Metro Bank shall continue
unimpaired.
d. As the result of the Fourth Merger, the
separate existence of First Dodge, FNB, and MBI shall
cease, and Fourth, as the surviving corporation, shall
continue its corporate existence under the laws of the
State of Kansas; the articles of incorporation and the
bylaws of Fourth in effect at the Effective Time shall be
the articles of incorporation and bylaws of the surviving
corporation until further amended as provided by Law; the
directors and officers of Fourth immediately preceding
the Fourth Merger shall be the directors and officers of
the surviving corporation; Fourth shall possess all the
rights, privileges, powers, and franchises of a public as
well as of a private nature of First Dodge, MBI, and FNB;
all property, real, personal, and mixed, belonging to
First Dodge, FNB, and MBI shall be vested in and belong
to Fourth; and all rights of creditors of First Dodge,
MBI, and FNB shall continue unimpaired.
e. From time to time as and when requested by
Fourth, BANK IV Kansas, or BANK IV Oklahoma, their
respective successors or assigns, the officers and
directors of the Banks, First Dodge, FNB, and MBI last in
office shall execute and deliver such deeds and other
instruments and shall take or cause to be taken such
other actions as shall be necessary or desirable to vest
or perfect in or to confirm of record or otherwise BANK
IV Kansas's, BANK IV Oklahoma's, or Fourth's title to,
and possession of, all the property, interests, assets,
rights, privileges, immunities, powers, franchises, and
authority of the Banks, First Dodge, FNB, MBI, or any of
them, and otherwise to carry out the purposes of this
Agreement; provided, that no such officer or director
shall thereby incur any expense or liability.
2.5. Conversion and Exchange of Shares.
a. Fourth Merger. The manner of converting or
exchanging the shares of capital stock of First Dodge,
FNB, and MBI outstanding at the Effective Time shall be
as follows:
(1) The Fourth Merger shall effect no
change in any of the then issued and outstanding
shares of Fourth Stock and none of Fourth's then
issued and outstanding shares of Fourth Stock
shall be converted or exchanged as the result of
the Fourth Merger.
(2) At the Effective Time, upon
consummation of the Fourth Merger, each issued
and outstanding share of First Dodge Stock and
each issued and outstanding share of MBI Common
Stock not owned by First Dodge shall cease to be
an issued and existing share, and each such share
shall automatically be converted into and
exchanged for a number of shares of Fourth Stock
as is set forth in the following table:
No. of Shares
Class of Stock of Fourth Stock
-------------- ---------------
First Dodge Stock 112.42
MBI Common Stock 0.30
(3) No separate amounts are being paid
with respect to the FNB Common Stock or MBI
Preferred Stock (all of which is owned by First
Dodge) or the MBI Common Stock owned by First
Dodge as their respective values are fully
reflected in the number of shares of Fourth Stock
being issued with respect to First Dodge Stock in
the Fourth Merger.
b. Bank Mergers. The manner of converting or
exchanging the shares of capital stock of the Banks into
capital stock of BANK IV Kansas or BANK IV Oklahoma, par
value $5 per share, shall be as follows:
(1) At the Effective Time, upon
consummation of the Bank Mergers each issued and
outstanding share of First National Stock shall
cease to be an issued and existing share, and
each such share not owned of record by FNB shall
automatically be converted into and exchanged for
the right to receive 95.92 shares of Fourth
Stock.
(2) No separate payment will be made with
respect to First National Stock owned by FNB or
to Metro Bank Stock, all of which is owned by
MBI, as their values are fully reflected in the
number of shares of Fourth Stock being issued
with respect to First Dodge Stock and MBI Stock
in the Fourth Merger.
(3) The 6,000 shares of First National
Stock issued and outstanding at the Effective
Time (consisting of 733 shares to be issued to
replace the shares being cancelled pursuant to
clause (l) above and the 5,267 shares then owned
of record by FNB) shall automatically be and
become an aggregate of 120,000 shares of capital
stock of BANK IV Kansas, par value $5 per share,
all of which shall be issued to and owned by
Fourth.
(4) The 305,000 shares of Metro Stock
issued and outstanding at the Effective Time,
shall automatically be and become an aggregate of
152,500 shares of capital stock of BANK IV
Oklahoma, par value $5 per share, all of which
shall be issued to and owned by Fourth.
c. Adjustment for Changes in Fourth's
Capitalization. In the event that between the date of
this Agreement and the Effective Time Fourth shall take
any action to subdivide its outstanding shares of common
stock into a greater number of shares, or to combine its
outstanding shares of common stock into a smaller number
of shares, or to declare a stock dividend on its
outstanding common stock, or to effect a reclassification
of its common stock, then the number and kind of shares
of Fourth Stock which the stockholders of First Dodge,
First National, and MBI shall be entitled to receive in
the Mergers shall be adjusted equitably to prevent
dilution or enlargement of the proportionate common stock
interests in Fourth to be received by them.
d. Stock Certificates. After the Effective Time
and until surrendered for exchange, each outstanding
stock certificate which prior to the Effective Time
represented First Dodge Stock, MBI Common Stock not owned
by First Dodge, or First National Stock not owned of
record by FNB, shall be deemed for all corporate purposes
to represent the right to receive the number of shares of
Fourth Stock into which the shares of stock have been so
converted; provided, that in any matters relating to the
shares represented by such stock certificates, Fourth,
BANK IV Kansas, and BANK IV Oklahoma may rely exclusively
upon the record of stockholders maintained by First
Dodge, MBI, or First National containing the names and
addresses of all stockholders of record at the Effective
Time. Unless and until such outstanding stock
certificates formerly representing such shares are so
surrendered, no dividend payable to holders of Fourth
Stock, as of any date on or subsequent to the Effective
Time, shall be paid to the holder of such outstanding
certificates in respect thereof. Upon surrender of such
outstanding certificates (or, in case of lost
certificates, upon receipt of a surety bond or other form
of indemnification which is satisfactory to Fourth),
however, the former First Dodge, MBI, or First National
stockholder shall receive a certificate evidencing the
shares of Fourth Stock to which such stockholder is
entitled plus the accrued dividends on such stock from
the Effective Time, without interest.
e. Fractional Shares. No fractional shares of
Fourth Stock will be issued. Instead, upon surrender of
First Dodge, MBI, or First National stock certificates
(or in the case of lost certificates, a surety bond or
other form of indemnification which is satisfactory to
Fourth), Fourth will pay, or cause to be paid, to the
holder thereof the value of the fractional interest to
which the holder thereof would otherwise be entitled,
based upon the Closing Price.
f. Exchange Procedure. Promptly after the
Effective Time, Fourth will send a notice and transmittal
form to each record holder of outstanding certificates
that immediately prior to the Effective Time evidenced
shares of First Dodge Stock, MBI Common Stock not owned
of record by First Dodge, or First National Stock not
owned of record by FNB, advising such stockholder of the
effectiveness of the Mergers and the procedures for
surrendering to Fourth such certificates in exchange for
certificates representing the number of shares of Fourth
Stock into which the shares of such capital stock
represented by such certificates shall have been
converted.
2.6. Advance Preparations for Bank Mergers. The
parties acknowledge that Fourth anticipates it will be desirable to
take various actions immediately following the Effective Time to
maximize the future profitability of BANK IV Kansas and BANK IV
Oklahoma, and that, as future stockholders of Fourth, the First
Dodge, MBI, FNB, and Bank stockholders will all benefit from such
actions to the extent they are successful. Accordingly, First
National and Metro Bank agree to cooperate with Fourth in making
advance plans and preparations for post-closing operations,
including, without limitation cooperation with employees of Fourth
in planning for post-closing operations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of First Dodge,
FNB, MBI, the Banks, and the Stockholders. Except as expressly
disclosed in the Disclosure Statement, First Dodge, FNB, MBI, the
Banks, and the Stockholders jointly and severally represent and
warrant to Fourth as follows:
a. Organization, Good Standing, and Authority.
Each of First Dodge, FNB, and MBI is a bank holding
company duly registered pursuant to the Bank Holding
Company Act. Each of the Corporations is a corporation
or bank duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its
incorporation, and each has all requisite corporate power
and authority to conduct its business as it is now
conducted, to own its properties and assets, and to lease
properties used in its business. The only Subsidiaries
of First National are First Ag Credit Corporation and
Southwest, Inc., both of which are Kansas corporations.
The only Subsidiary of FNB is First National which has
the two Subsidiaries described above. Metro Bank has no
Subsidiaries. The only Subsidiary of MBI is Metro Bank.
The only Subsidiaries of First Dodge are FNB and its
Subsidiaries and MBI and its Subsidiary. None of the
Corporations is in violation of its charter documents or
bylaws, or of any applicable Law in any material respect.
The deposits of both of the Banks are insured by the
Federal Deposit Insurance Corporation to the extent
provided by the Federal Deposit Insurance Act and each of
the Banks has paid all assessments and filed all reports
required to be filed under the Federal Deposit Insurance
Act.
b. Binding Obligations; Due Authorization. This
Agreement constitutes, and the Merger Agreements will
upon execution and delivery constitute, subject only to
the approval and adoption thereof by the stockholders of
First Dodge, FNB, MBI, and the Banks, valid and binding
obligations of First Dodge, FNB, MBI, each of the Banks,
and each Stockholder, enforceable against each of such
parties in accordance with the respective terms of such
documents, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar
Laws and equitable principles affecting creditors' rights
generally. The execution, delivery, and performance of
this Agreement, the Merger Agreements, and the
transactions contemplated by all such agreements have
been duly authorized by the respective boards of
directors of First Dodge, FNB, MBI, and each Bank.
c. Absence of Default. None of the execution or
the delivery of this Agreement and the Merger Agreements,
the consummation of the transactions contemplated hereby
or thereby, or the fulfillment of the terms hereof or
thereof, will (1) conflict with, or result in a breach of
the terms, conditions, or provisions of, or constitute a
default under the charter documents or bylaws of any of
the Corporations or under any agreement or instrument
under which any of the Corporations or any of the
Stockholders is obligated, or (2) violate any Law to
which any of the Corporations or any of the Stockholders
is subject.
d. Capitalization. First Dodge is authorized to
issue 100,000 shares of First Dodge Stock, par value
$1.00 per share, of which 5,254.5 shares are validly
issued and outstanding. FNB is authorized to issue: (i)
100,000 shares of FNB Common Stock, par value $1.00 per
share, of which 5,254.50 shares are validly issued and
outstanding; and (ii) 1,500,000 shares of FNB Preferred
Stock, par value $1.00 per share, none of which is issued
and outstanding. MBI is authorized to issue: (i)
1,000,000 shares of MBI Common Stock, par value $.10 per
share, of which 905,000 are validly issued, 904,795
shares are validly issued and outstanding, and 205 shares
are held as treasury shares; and (ii) 3,000,000 shares of
MBI Preferred Stock, par value $1.00 per share, of which
1,915,333 shares are validly issued and outstanding.
Metro Bank is authorized to issue 340,000 shares of Metro
Stock, par value $2.50 per share, of which 305,000 shares
are validly issued and outstanding. First National is
authorized to issue 6,000 shares of First National Stock,
par value $100 per share, all of which are validly issued
and outstanding. First Dodge owns all of the issued and
outstanding FNB Common Stock and MBI Preferred Stock and
900,795 shares of MBI Common Stock, all of which are free
and clear of all encumbrances, liens, security interests,
and claims whatsoever except for the pledge of such
shares to Commerce Bank, N.A. FNB owns 5,267 shares of
First National Stock, free and clear of all encumbrances,
liens, security interests, and claims whatsoever. MBI
owns all of the issued and outstanding shares of Metro
Stock, free and clear of all encumbrances, liens,
security interests, and claims whatsoever.
e. Charter Documents. True and correct copies
of the charter documents and bylaws of each of the
Corporations, with all amendments thereto, are included
in the Disclosure Statement as Exhibits "E-1" to "E-14."
f. Options, Warrants, and Other Rights. None of
the Corporations has outstanding any options, warrants,
or rights of any kind requiring it to sell or issue to
anyone any capital stock of any class and none of the
Corporations has agreed to issue, sell, or purchase any
additional shares of any class of its capital stock.
g. Financial Statements. Included in the
Disclosure Statement as Exhibits "G-1" through "G-4" are
true and complete copies of the following financial
statements, all of which have been prepared in accordance
with GAAP and all applicable regulatory accounting
principles consistently followed throughout the periods
indicated and fairly present in all material respects the
financial condition of the Corporations as of the dates
and for the periods indicated, subject in the case of
interim financial statements, to normal recurring year-
end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse)
and the absence of notes (which if presented would not
differ materially from those included in the most recent
year-end financial statements):
(1) Audited Consolidated Financial
Statements of First National as of December 31,
1992 and 1991, and for the fiscal years then
ended, with auditors' report thereon and notes
thereto, which have been examined by Smoll,
Banning & Neier, Chtd, independent certified
public accountants;
(2) Unaudited financial statements of each
of the Corporations, as of September 30, 1993 and
1992 and for the periods then ended;
(3) Consolidated Reports of Condition and
Income as of March 31, June 30, September 30,
and December 31, 1993, as filed by the Banks with
the Comptroller and the FDIC; and
(4) Annual Reports on Form FR Y-9 filed by
First Dodge, FNB, and MBI with the Board for the
years ended December 31, 1992 and 1991.
As soon as practicable between the date hereof and
the Effective Time, the Corporations will deliver to
Fourth copies of monthly operating statements and monthly
securities inventory reports of the Banks and of all
reports filed by either of them with any regulatory
agencies. The books of account of each of the
Corporations and each of the Financial Statements fairly
and correctly reflect and, when delivered, will reflect
in all material respects in accordance with GAAP and all
applicable rules and regulations of regulatory agencies
applied on a consistent basis, the respective incomes,
expenses, assets, and liabilities, absolute or
contingent, of each of the Corporations (except for the
absence in the monthly operating statements of the Banks
of certain information and footnotes normally included in
financial statements prepared in accordance with GAAP
which in the aggregate would not be materially adverse).
There have been no material adverse changes in the
financial condition of any of the Corporations from
December 31, 1992, other than changes made in the usual
and ordinary conduct of the businesses of the
Corporations, none of which has been or will be
materially adverse and all of which have been or will be
recorded in the books of account of the Corporations; and
except as specifically permitted by this Agreement, there
have been no material adverse changes in the respective
businesses, assets, properties, or liabilities, absolute
or contingent, of any of the Corporations, or in their
respective condition, financial or otherwise, from the
date of the most recent of the Financial Statements that
has been delivered to Fourth on the date hereof other
than (i) changes occurring in the usual and ordinary
conduct of the business of the Corporations, none of
which has been or will be materially adverse and all of
which have been or will be recorded in the respective
books of account of the Corporations, and (ii) resulting
from action required or permitted by this Agreement to be
taken by any of the Corporations. To the extent required
by GAAP, all contingent liabilities of any of the
Corporations, other than letters of credit and similar
obligations of the Banks incurred in the ordinary course
of business, are described in or reserved against in the
Financial Statements listed above.
h. Properties. First Dodge, FNB, MBI, and First
National's Subsidiaries do not own or lease any real
property. Exhibit "H" to the Disclosure Statement is a
complete list of all real estate owned or leased by
either Bank. Each Bank has good and marketable title in
fee simple to all of the real property shown on its book
as being owned by it, free and clear of all liens,
encumbrances, and charges, except for those exceptions
described on Exhibit "H" to the Disclosure Statement and
Permitted Encumbrances. All leases of real property to
which a Bank is a party as lessee, a true and complete
copy of each of which with all amendments thereto is
included in Exhibit "H" to the Disclosure Statement, are
valid and enforceable in accordance with their respective
terms except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar Laws
and equitable principles affecting creditors' rights
generally, and there has been no material default by any
party thereto. No zoning ordinance prohibits, interferes
with, or materially impairs the usefulness of the
Occupied Properties; and all the premises on the Occupied
Properties or leased by a Bank are in good operating
condition and repair, normal wear and tear excepted.
i. Personal Property. Either First National or
Metro Bank has good and merchantable title to all of the
machinery, equipment, materials, supplies, and other
property of every kind, tangible or intangible, contained
in its offices and other facilities or shown as assets in
its records and books of account, free and clear of all
liens, encumbrances, and charges except for leasehold
improvements to leased premises and for personal property
held under the leases described on Exhibit "I" to the
Disclosure Statement. Exhibit "I" to the Disclosure
Statement is a complete list of all leases of personal
property to which either of the Banks is a party. All
leases of personal property to which either of the Banks
is a party as lessee, true and complete copies of each
which with all amendments thereto are included in Exhibit
"I" to the Disclosure Statement, are valid and
enforceable in accordance with their terms, and there has
been no material default by any party thereto. All of
such personal property owned or leased by either of the
Banks is in good operating condition, normal wear and
tear excepted.
j. Taxes. The Corporations have all filed all
tax returns and reports required to be filed with the
United States Government and with all states and
political subdivisions thereof where any such returns or
reports are required to be filed and where the failure to
file such return or report would subject any of the
Corporations to any material liability or penalty. All
taxes imposed by the United States, or by any foreign
country, or by any state, municipality, subdivision, or
instrumentality of the United States or of any foreign
country, or by any other taxing authority, which are due
and payable by any of the Corporations have been paid in
full or adequately provided for by reserves shown in the
records and books of account of the Corporations and in
the Financial Statements. No extension of time for the
assessment of deficiencies for any years is in effect.
None of the Corporations has any knowledge of any
unassessed tax deficiency proposed or threatened against
any of them.
k. Contracts. Other than Permitted Contracts
and agreements with customers of the Banks and with
financial institutions entered into by the Banks in the
ordinary course of their banking businesses, attached to
the Disclosure Statement as Exhibit "K" is a list of all
material contracts and other agreements and arrangements,
both written and oral, to which any of the Corporations
is a party, which affect or pertain to the operation of
their respective businesses, and which involve future
payments by any of the Corporations of $10,000 or more
(the "Scheduled Agreements"). All parties to the
Scheduled Agreements have in all material respects
performed, and are in good standing with respect to, all
the material obligations required to be performed under
all such contracts and other agreements and arrangements,
and no obligation with respect thereto is overdue. All
of the agreements of the Corporations, including without
limitation the agreements disclosed in writing pursuant
to this clause k, are valid, binding, and enforceable in
accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization,
moratorium, or similar Laws and equitable principles
affecting creditors' rights generally. Except as
otherwise noted in Exhibit "K" to the Disclosure
Statement, no contract, lease, or other agreement or
arrangement to which any of the Corporations is a party
or as to which any of any of their assets is subject
requires the consent of any third party in connection
with this Agreement or any of the Mergers. The
Corporations are not in default under any of the
Scheduled Agreements; the Corporations are not aware of
any default by any other party to any of the Scheduled
Agreements or any claim by any other party that the
Corporations are in default under any of the Scheduled
Agreements. Except for Permitted Contracts and except as
set forth in Exhibit "K" to the Disclosure Statement,
none of the Corporations is a party to:
(1) Any contract for the purchase or sale
of any materials, services, or supplies which
contains any escalator, renegotiation, or
redetermination clause or which commits it for a
fixed term;
(2) Any contract of employment with any
officer or employee not terminable at will
without liability on account of such termination;
(3) Any management or consultation
agreement not terminable at will without
liability on account of such termination;
(4) Any license, royalty, or union
agreement, or loan agreement in which a
Corporation is the borrower;
(5) Any contract, accepted order, or
commitment for the purchase or sale of materials,
services, or supplies having a total remaining
contract price in excess of $10,000;
(6) Any contract containing any
restrictions on any party thereto competing with
any Corporation or any other person;
(7) Any other agreement which materially
affects the business, properties, or assets of
any of the Corporations, or which was entered
into other than in the ordinary and usual course
of business; or
(8) Any letter of credit or commitment to
make any loan or group of loans to related
parties in an amount in excess of $100,000.
None of the Corporations' agreements described in this
clause k other than loans made in the ordinary course is
reasonably anticipated by any of the Corporations or any
Stockholder to result in a material loss to any of the
Corporations.
l. Labor Relations; Employees; ERISA. None of
the Corporations is a party to or affected by any
collective bargaining agreement or employment agreement,
nor is any Corporation a party to any pending or
threatened labor dispute, organizational efforts, or
labor negotiations. Each of the Corporations has
complied with all applicable Laws relating to the
employment of labor, including, but not limited to, the
provisions thereof relating to wages, hours, collective
bargaining, payment of social security taxes, and equal
employment opportunity, the violation of which would have
a materially adverse impact on their respective
businesses. None of the Corporations is liable for any
arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing. Except for First
National's profit sharing plan (the "Profit Sharing
Plan"), and Metro Bank's 401K Plan (the "401K Plan") true
and complete copies of each of which together with all
amendments thereto are attached as Exhibits L-1 and L-2,
respectively, to the Disclosure Statement, none of the
Corporations has any written or oral retirement, pension,
profit sharing, stock option, bonus, or other employee
benefit plan or practice other than group health, life,
and accident insurance. The Profit Sharing Plan and the
401K Plan are both in material compliance with ERISA and
the Code and each is a "qualified plan" within the
meaning of Section 401(a) of the Code and each is the
subject of a currently effective written determination of
the Internal Revenue Service to such effect and to the
further effect that the trust thereunder is a trust
exempt from tax under Section 501 of the Code. The
Corporations know of no facts or circumstances that could
adversely affect the status of either such plan as such
a plan or such trust as such a trust. All accrued
contributions and other payments to be made by First
National under the Profit Sharing Plan or by Metro Bank
under the 401K Plan have been made or reserves adequate
for such purposes have been set aside therefor. None of
the Corporations has violated any of the provisions of
ERISA, and none of them has engaged in any "prohibited
transactions" as such term is defined in Section 406 of
ERISA. Each of the Corporations has complied with all
applicable notice requirements and has provided group
health care continuation coverage under Section 4980B of
the Code and/or any other applicable Laws. There is no
employee of any of the Corporations whose employment is
not terminable at will without severance pay or other
penalty or compensation.
m. Government Authorizations. Each of the
Corporations has all permits, charters, licenses, orders,
and approvals of every federal, state, local, or foreign
governmental or regulatory body required in order to
permit it to carry on its business substantially as
presently conducted. All such licenses, permits,
charters, orders, and approvals are in full force and
effect, and none of the Corporations knows of any
threatened suspension or cancellation of any of them and
none of the Corporations knows of any fact or
circumstance that will interfere with or adversely affect
the renewal of any of such licenses, permits, charters,
orders, or approvals; and none of such permits, charters,
licenses, orders, and approvals will be affected by the
consummation of the transactions contemplated by this
Agreement.
n. Insurance. Exhibit "N" to the Disclosure
Statement is a complete list of all insurance policies
presently in effect and in effect during the past three
years. All the insurance policies and bonds currently
maintained by any of the Corporations are in full force
and effect.
o. Litigation. Exhibit "O" to the Disclosure
Statement contains a true and complete list and brief
description of all pending or, to the knowledge of any of
the Corporations or Stockholders, threatened Litigation
to which any of the Corporations is or would be a party
or to which any of their assets is or would be subject.
Except as described on Exhibit "O" to the Disclosure
Statement, none of the Corporations is a party to any
Litigation other than routine litigation commenced by a
Bank to enforce obligations of borrowers in which no
counterclaims for any material amounts of money have been
asserted or, to the knowledge of any of the Corporations,
threatened.
p. Brokers or Finders. No broker, agent,
finder, consultant, or other party (other than legal,
accounting, and financial advisors) has been retained by
any of the Corporations or any Stockholder or is entitled
to be paid based upon any agreements, arrangements, or
understandings made by any of the Corporations or any
Stockholder in connection with any of the transactions
contemplated by this Agreement or the Merger Agreements.
q. SEC Filings To Be Accurate. The information
pertaining to the Corporations and Stockholders which has
been or will be furnished to Fourth by or on behalf of
any of the Corporations or Stockholders for inclusion in
the Registration Statement or the Proxy Statement, and
the information pertaining to any of the Corporations or
Stockholders which will appear in the Registration
Statement or the Proxy Statement, in the form filed with
the SEC, will not contain any untrue statement of any
material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which
they are made, not misleading. The Corporations and
Stockholders shall promptly advise Fourth in writing if
prior to the Effective Time any of them shall obtain
knowledge of any fact that would make it necessary to
amend the Registration Statement or the Proxy Statement,
or to supplement the prospectus contained in the
Registration Statement, in order to make the statements
therein not misleading or to comply with applicable Law.
r. Stockholder Matters. Exhibit "R" to the
Disclosure Statement accurately sets forth after the name
of each Stockholder the number of shares of First Dodge
Stock, MBI Common Stock, and First National Stock
beneficially owned by such Stockholder, in each case free
and clear of all liens, encumbrances, claims, and
equities which would impair the right of the record owner
to vote such shares in favor of the Fourth Merger or the
BANK IV Kansas Merger, and the number of shares of Fourth
Stock to be received in the Fourth Merger and the BANK IV
Kansas Merger; provided, however, that no Stockholder
makes any warranty as to the shares owned by any other
Stockholder. None of the Corporations is a party and
none of the Stockholders is a party to any agreement
which in any way restricts the right of any stockholder
of any of the Corporations to vote on this Agreement or
the Merger Agreements or consummate the transactions
contemplated therein. There is no plan or intention by
the Stockholders, and to the best of the knowledge of
First Dodge, FNB, MBI, Metro Bank or First National,
there is no plan or intention on the part of the
remaining stockholders of MBI or First National to sell,
exchange, or otherwise dispose of a number of shares of
Fourth Stock received in any of the Mergers that would
reduce the First Dodge, MBI, and First National
stockholders' ownership of Fourth Stock to a number of
shares having a value, as of the Effective Time, of less
than 50 percent of the value of all of the capital stock
of all of such corporations outstanding immediately
prior to the Effective Time. Solely for purposes of the
preceding sentence, an amount of Fourth Stock equal to
(i) the value of First Dodge Stock, First National Stock,
and MBI Common Stock surrendered by persons exercising
dissenters' rights, (ii) the value of stock surrendered
for cash in lieu of fractional shares of Fourth Stock,
and (iii) the value of shares of Fourth Stock held by
stockholders prior to the Mergers and otherwise sold,
redeemed, or disposed of prior or subsequent to the
Effective Time, shall be deemed received by such
stockholders in the Mergers and sold, exchanged, or
disposed of immediately thereafter.
s. Environmental Compliance. Each of the Banks
is in material compliance with all relevant
Environmental, Health, and Safety Laws and none of the
Corporations has any material Environmental, Health, and
Safety Liabilities. Except as described in Exhibit "S"
to the Disclosure Statement, none of the Occupied
Properties and, to the knowledge of First Dodge, FNB,
MBI, and the Banks, no real or personal property owned or
leased by either Bank at any time is now being used or
has at any time in the past ever been used for the
storage (whether permanent or temporary), disposal, or
handling of any Hazardous Materials, nor are any
Hazardous Materials located in, on, under, or at any
real or personal property owned, leased, or used by a
Bank. Neither Stockholders nor any of the Corporations
have received any notice of a material violation of any
Environmental, Health, and Safety Law, or any notice of
any material potential Environmental, Health, and Safety
Liabilities with respect to any properties or assets in
which any of the Corporations has or has had any
interest.
t. Employment of Aliens. The Banks are in
material compliance with the Immigration and Control Act
of 1986.
u. Notes and Leases. All promissory notes and
leases owned by the Banks at the Effective Time will
represent bona fide indebtedness or obligations to such
Bank and are and will be fully enforceable in accordance
with their terms without valid set-offs or counterclaims,
except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws and equitable
principles affecting creditors' rights generally;
provided, however, no representation or warranty is made
in this Agreement as to the collectibility of any such
note or lease.
v. No Misrepresentations. Neither this
Agreement, the Financial Statements, nor any other
letter, certificate, statement, or document furnished or
to be furnished to Fourth by or on behalf of the
Corporations, the Stockholders, or any of them, pursuant
to or in connection with this Agreement and the
transactions contemplated hereby, when considered in
conjunction with all other information and documents
furnished to Fourth hereunder, contains or will contain
any misstatement of a material fact or omits or will omit
to state a material fact necessary to make the statements
contained herein or therein not misleading.
w. Updating of Representations and Warranties.
Between the date hereof and the Effective Time, First
Dodge, FNB, MBI, the Banks, and the Stockholders will
promptly disclose to Fourth in writing any information of
which any of them has actual knowledge (1) concerning any
event that would render any of their representations or
warranties contained in this Agreement untrue if made as
to the date of such event, (2) which renders any
information set forth in this Agreement or the Disclosure
Statement no longer correct in all material respects, or
(3) which arises after the date hereof and which would
have been required to be included in this Agreement or
the Disclosure Statement if such information had existed
on the date hereof.
3.2. Representations and Warranties of Fourth. Fourth
represents and warrants to First Dodge, FNB, MBI, the Banks, and
the Stockholders, and each of them, as follows:
a. Organization, Good Standing, and Authority.
Fourth is a bank holding company duly registered pursuant
to the Bank Holding Company Act. Fourth and each of its
banking Subsidiaries is a corporation or bank duly
organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation, and
each has all requisite corporate power and authority to
conduct its business as it is now conducted, to own its
properties and assets, and to lease properties used in
its business. None of Fourth or any of its banking
Subsidiaries is in violation of its charter documents or
bylaws, or of any applicable Law in any material respect,
or in default in any material respect under any material
agreement, indenture, lease, or other document to which
it is a party or by which it is bound. All of Fourth's
issued and outstanding equity securities are duly
registered under the Federal Securities Exchange Act of
1934, as amended. Shares of Fourth Stock are eligible
for trading in the National Market System of NASDAQ.
b. Binding Obligations; Due Authorization. This
Agreement constitutes, and the Merger Agreements will
upon execution and delivery constitute, valid and binding
obligations of Fourth and, in the case of the Bank Merger
Agreements, BANK IV Oklahoma and BANK IV Kansas, as the
case may be, enforceable against them in accordance with
the terms of such documents, except as limited by
applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws and equitable
principles affecting creditors' rights generally. The
execution, delivery, and performance of this Agreement
and the Merger Agreements, and the transactions
contemplated by all such agreements have been duly
authorized by the respective boards of directors of
Fourth, BANK IV Kansas, and BANK IV Oklahoma. No
approval of the holders of outstanding Fourth Stock or
other voting securities of Fourth is necessary to
consummate the Mergers.
c. Absence of Default. None of the execution or
the delivery of this Agreement and the Merger Agreements,
the consummation of the transactions contemplated hereby
or thereby, or the fulfillment of the terms hereof or
thereof, will (1) conflict with, or result in a breach of
the terms, conditions, or provisions of, or constitute a
default under the charter documents or bylaws of Fourth
or any of its banking Subsidiaries or under any agreement
or instrument under which Fourth or any of its banking
Subsidiaries is obligated, or (2) violate any Law to
which any of them is subject.
d. Disclosure Materials Delivered by Fourth.
Fourth has previously delivered to First Dodge its Annual
Report on Form 10-K for the year ended December 31, 1992,
and its Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1993, in each
case with exhibits thereto, as filed with the SEC, and a
copy of the definitive proxy statement used by Fourth in
connection with its 1993 annual stockholders' meeting.
All of the financial statements contained in such
documents have been prepared in accordance with GAAP
applied on a consistent basis. The books of account of
Fourth and each of its banking Subsidiaries fairly and
correctly reflect, in accordance with GAAP applied on a
consistent basis, the respective incomes, expenses,
assets, and liabilities, absolute and contingent, of
Fourth and each of its banking Subsidiaries. There have
been no material adverse changes in the consolidated
financial condition of Fourth from September 30, 1993.
e. Brokers or Finders. No broker, agent,
finder, consultant, or other party (other than legal and
accounting advisors) has been retained by Fourth or is
entitled to be paid based upon any agreements,
arrangements, or understandings made by Fourth in
connection with any of the transactions contemplated by
this Agreement or the Merger Agreements.
f. SEC Filings to be Accurate. The information
pertaining to Fourth which has been or will be furnished
by or on behalf of Fourth and its banking Subsidiaries or
its management for inclusion in the Registration
Statement or the Proxy Statement, and the information
pertaining to Fourth which will appear in the
Registration Statement or the Proxy Statement, in the
form filed with the SEC, will contain no untrue statement
of any material fact and will not omit to state any
material fact required to be stated therein or necessary
to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
Fourth shall promptly advise First Dodge in writing if
prior to the Effective Time it shall obtain knowledge of
any fact that would make it necessary to amend the
Registration Statement or the Proxy Statement, or to
supplement the prospectus contained in the Registration
Statement, in order to make the statements therein not
misleading or to comply with applicable Law.
g. No Misrepresentations. Neither this
Agreement, the disclosure documents described in clause
"d" of this Section 3.2, nor any other letter,
certificate, statement, or document furnished or to be
furnished to First Dodge, FNB, MBI, the Banks, or the
Stockholders by or on behalf of Fourth pursuant to or in
connection with this Agreement and the transactions
contemplated hereby contains or will contain any
misstatement of a material fact or omits or will omit to
state a material fact necessary to make the statements
contained herein or therein not misleading.
h. Capitalization. Fourth is authorized to
issue (i) 50,000,000 shares of common stock, par value $5
per share, of which 26,352,215 shares were issued and
outstanding on December 31, 1993, (ii) 250,000 shares of
Class A 7% Cumulative Convertible Preferred Stock, par
value $100 per share, all of which are issued and
outstanding, and (iii) 5,000,000 shares of Class B
Preferred Stock, without par value, none of which have
been issued. The shares of Fourth Stock to be issued in
the Mergers will be duly and validly issued, fully paid,
and nonassessable, and not issued in violation of any
preemptive rights or any Laws applicable thereto.
i. Updating of Representations and Warranties.
Between the date hereof and the Effective Time, Fourth
will promptly disclose to First Dodge and the
Stockholders in writing any information of which it has
actual knowledge (1) concerning any event that would
render any representation or warranty of Fourth untrue if
made as of the date of such event, (2) which renders any
information set forth in this Agreement no longer correct
in all material respects, or (3) which arises after the
date hereof and which would have been required to be
included in the Agreement if such information had existed
on the date hereof.
ARTICLE IV
SECURITIES LAWS MATTERS
4.1. Registration Statement and Proxy Statement.
Fourth shall as soon as practicable prepare and file the
Registration Statement under and pursuant to the Securities Act for
the purpose of registering the shares of Fourth Stock to be issued
in the Mergers. First Dodge, FNB, MBI, and the Banks shall each
provide promptly to Fourth such information concerning its
respective business, financial condition, and affairs as may be
required or appropriate for inclusion in the Registration Statement
or the Proxy Statement and each shall cause its counsel and
auditors to cooperate with the other's counsel and auditors in the
preparation and filing of the Registration Statement and the Proxy
Statement. Fourth and First Dodge shall use their Best Efforts to
have the Registration Statement declared effective under the
Securities Act as soon as may be practicable and thereafter First
Dodge, MBI, and First National shall each distribute the Proxy
Statement to its respective stockholders in accordance with
applicable Laws not fewer than 20 business days prior to the date
on which the Fourth Merger Agreement and the Bank Merger Agreements
are to be submitted to the stockholders for voting thereon. If
necessary, in light of developments occurring subsequent to the
distribution of the Proxy Statement to stockholders, First Dodge,
MBI, and First National shall each mail or otherwise furnish to its
respective stockholders such amendments to the Proxy Statement or
supplements to the Proxy Statement as may, in the opinion of Fourth
or First Dodge, be necessary so that the Proxy Statement, as so
amended or supplemented, will contain no untrue statement of any
material fact and will not omit to state any material fact required
to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, or as may be necessary to comply with applicable Law.
Fourth shall not be required to maintain the effectiveness of the
Registration Statement for the purpose of resale of Fourth Stock by
any person.
4.2. State Securities Laws. Fourth shall prepare and
file and the parties hereto shall cooperate in making any filings
required under the securities laws of any State in order either to
qualify or register the Fourth Stock so it may be offered and sold
lawfully in such State in connection with the Mergers or to obtain
an exemption from such qualification or registration.
4.3. Affiliates. Certificates representing shares of
Fourth Stock issued to Affiliates of First Dodge, MBI, or First
National pursuant to the Fourth Merger Agreement or the Bank Merger
Agreements may be subjected to stop transfer orders and may bear a
restrictive legend in substantially the following form:
The shares of common stock represented by this
certificate have been issued or transferred to the
registered holder as the result of a transaction to which
Rule 145 under the Securities Act of 1933, as amended
(the "Act"), applies. Such shares may not be sold,
pledged, transferred, or assigned, and the issuer shall
not be required to give effect to any attempted sale,
pledge, transfer, or assignment, except (i) pursuant to
a then current effective registration under the Act, (ii)
in a transaction permitted by Rule 145 as to which the
issuer has, in the reasonable opinion of its counsel,
received reasonably satisfactory evidence of compliance
with Rule 145, or (iii) in a transaction which, in the
opinion of counsel satisfactory to the issuer or as
described in a "no-action" or interpretive letter from
the staff of the Securities and Exchange Commission, is
not required to be registered under the Act. Transfer of
the shares represented by this certificate is further
restricted by an Affiliate's Agreement dated as of
__________, 1994, between the issuer and the registered
holder to which reference is hereby made.
ARTICLE V
CLOSING CONDITIONS
5.1. Conditions to Obligations of Fourth, BANK IV
Kansas, and BANK IV Oklahoma. The obligations of Fourth to effect
the Mergers and to issue any Fourth Stock and the obligation of
BANK IV Kansas and BANK IV Oklahoma to effect the Bank Mergers
shall be subject to the following conditions which may, to the
extent permitted by Law, be waived by Fourth at its option:
a. Stockholder Approvals. The approval,
ratification, and confirmation of this Agreement and the
Bank Merger Agreements and the Fourth Merger Agreement by
the respective stockholders of each Bank and First Dodge,
FNB, and MBI shall have been duly obtained as required by
Law.
b. Absence of Litigation. No order, judgment,
or decree shall be outstanding restraining or enjoining
consummation of any of the Mergers; and no Litigation
shall be pending or threatened in which it is sought to
restrain or prohibit any of the Mergers or obtain other
substantial monetary or other relief against one or more
of the parties hereto in connection with this Agreement.
c. Securities Laws. The Registration Statement
shall have become effective under the Securities Act and
Fourth shall have received all state securities laws
permits or other authorizations or confirmation of the
availability of exemption from registration requirements
necessary to issue the Fourth Stock in the Mergers.
Neither the Registration Statement nor any such permit,
authorization, or confirmation shall be subject to a
stop-order or threatened stop-order or similar proceeding
or order by the SEC or any state securities authority.
d. Regulatory Approvals. All Required Approvals
shall have been procured and shall continue to be in
effect.
e. Limit on Dissent. The holders of an aggre-
gate amount of the then issued and outstanding First
Dodge Stock, MBI Common Stock, and First National Stock
which shall be convertible into an amount of Fourth Stock
issuable in the Mergers equal to not more than five
percent of the total amount of Fourth Stock issuable in
the Mergers shall have validly exercised their rights as
dissenting stockholders.
f. Minimum Net Worths of the Banks. Fourth
shall be reasonably satisfied that the stockholders'
equity of the Metro Bank and the consolidated
stockholders' equity of First National as of the end of
the month immediately preceding the Effective Time,
computed in accordance with GAAP, are not less than
$3,500,000 and $9,000,000, respectively.
g. Opinion of Counsel. Fourth shall have
received the opinion of Mangan, Dalton, Trenkle, Rebein
& Doll, Chartered, counsel to the Corporations and the
Stockholders, substantially in the form of Exhibit "D"
hereto.
h. Representations and Warranties; Covenants.
The representations and warranties of First Dodge, FNB,
MBI, the Banks, and the Stockholders contained in Section
3.1 of this Agreement shall have been true and correct in
all material respects on the date made and shall be true
and correct in all material respects at the Effective
Time as though made at such time, excepting: (i) any
changes occurring in the ordinary course of business,
none of which shall have been materially adverse, and
(ii) any changes contemplated or permitted by this
Agreement. First Dodge, FNB, MBI, the Banks, and the
Stockholders shall each have performed in all material
respects all of their obligations under this Agreement.
i. Certificates. First Dodge, FNB, MBI, and the
Banks shall each have delivered to Fourth a certificate,
in form and substance satisfactory to Fourth, dated the
Effective Time and signed by its chief executive officer
and chief financial officer certifying in such detail as
Fourth may reasonably request the fulfillment of
conditions a, b, e, f, and h above and m below.
j. Affiliates' Agreements. Fourth shall have
received all of the agreements of Affiliates of First
Dodge, MBI, and First National substantially in the form
of Exhibit "G" hereto.
k. Pooling of Interests. Fourth shall have
received a letter from its independent public
accountants, dated the Effective Time, to the effect that
the Mergers can each properly be treated for accounting
purposes as a "pooling of interests" under GAAP.
l. Employment Agreement. John V. Harding shall
have executed and delivered an agreement substantially in
the form of Exhibit "E" hereto.
m. Material Adverse Changes. Since the date of
this Agreement there shall not have occurred any material
adverse change in the condition (financial or otherwise)
business, liabilities (contingent or otherwise),
properties, or assets of any of the Corporations.
n. Satisfactory Environmental Reports. Fourth
shall have received environmental assessment reports
covering all of the Corporations' real estate, in form
and substance reasonably satisfactory to Fourth, which do
not cause Fourth reasonably to conclude that there are
any material Environmental, Health, and Safety
Liabilities associated with any of such real estate.
5.2. Conditions to Obligations of First Dodge, FNB,
MBI, the Banks, and the Stockholders. The obligations of First
Dodge, FNB, MBI, the Banks, and the Stockholders to effect the
Mergers and to consummate the transactions contemplated hereby
shall be subject to the following conditions which may, to the
extent permitted by Law, be waived by it at its option:
a. General. Each of the conditions specified in
clauses a, b, c, and d of Section 5.1 of this Agreement
shall have occurred and be continuing.
b. Representations and Warranties; Covenants.
The representations and warranties of Fourth contained in
Section 3.2 of this Agreement shall have been true and
correct in all material respects on the date made and
shall be true and correct in all material respects at the
Effective Time as though made at such time, excepting any
changes occurring in the ordinary course of business,
none of which shall have been materially adverse, and
excepting any changes contemplated or permitted by this
Agreement. Fourth shall have duly performed in all
material respects all of its obligations under this
Agreement.
c. Certificate. Fourth shall have delivered to
First Dodge a certificate, in form and substance
satisfactory to First Dodge, dated the Effective Time and
signed by its chief executive officer and chief financial
officer on behalf of Fourth, certifying in such detail as
First Dodge may reasonably request as to the fulfillment
of the foregoing conditions except for the conditions set
forth in clauses a and d of Section 5.1 of this
Agreement.
d. Opinion of Counsel. First Dodge shall have
received the opinion of Foulston & Siefkin, counsel to
Fourth, addressed to First Dodge, FNB, MBI, the Banks and
their stockholders, satisfactory in form and substance to
First Dodge, substantially in the form of Exhibit "F"
hereto.
e. Material Adverse Change. Since the date of
this Agreement there shall not have occurred any material
adverse change in the condition (financial or otherwise),
business, properties, liabilities (contingent or
otherwise), or assets of Fourth.
ARTICLE VI
EFFECTIVE TIME
The consummation of the Mergers and the delivery of the
certificates and other documents called for by this Agreement, and
the consummation of all other transactions contemplated by this
Agreement shall take place at such time and place in Wichita,
Kansas, as the parties may mutually agree which, unless otherwise
agreed, shall be not later than the last day of the month in which
the final regulatory approval required to effect the Mergers is
received and the latest required waiting period expires. The
parties agree that they shall exert their reasonable best efforts
to cause the Effective Time to be on or before June 30, 1994.
ARTICLE VII
TERMINATION OF AGREEMENT
7.1. Mutual Consent; Absence of Stockholder Approval;
Termination Date. This Agreement and the Merger Agreements shall
terminate at any time when the parties hereto mutually agree in
writing. This Agreement and the Merger Agreements may also be
terminated at the election of either First Dodge or Fourth, as the
case may be, upon written notice from the party electing to
terminate this Agreement and the Merger Agreements to the other
party if, without fault on the part of the party electing to
terminate this Agreement and the Merger Agreements, the Merger
Agreements are not ratified and approved by the stockholders of
First Dodge, FNB, MBI, Metro Bank or First National by the
requisite vote or if there has been a denial of a Required Approval
except upon compliance with terms reasonably deemed onerous by
Fourth. Unless extended by written agreement of the parties, this
Agreement and the Merger Agreements shall terminate if all
conditions to the obligations of the parties hereto have not
occurred on or before June 30, 1994.
7.2. Election by Fourth. Notwithstanding the approval
of the Merger Agreements by the stockholders of BANK IV Kansas and
BANK IV Oklahoma, this Agreement and the Merger Agreements shall
terminate at Fourth's election, upon written notice from Fourth to
First Dodge, if any one or more of the following events shall occur
and shall not have been remedied to the satisfaction of Fourth
within 30 days after written notice is delivered to First Dodge:
(a) there shall have been any material breach of any of the
material obligations, covenants, or warranties of First Dodge, FNB,
MBI, First National, Metro Bank, or the Stockholders hereunder; or
(b) there shall have been any written representation or statement
furnished by First Dodge, FNB, MBI, First National, Metro Bank, or
the Stockholders hereunder which at the time furnished is false or
misleading in any material respect in relation to the size and
scope of the transactions contemplated by this Agreement.
7.3. Election by First Dodge. Notwithstanding the
approval of the Merger Agreements by the stockholders of First
Dodge, FNB, MBI, First National, or Metro Bank, this Agreement and
the Merger Agreements shall terminate at the election of First
Dodge, upon written notice from First Dodge to Fourth, if any one
or more of the following events shall occur and shall not have been
remedied to their satisfaction within 30 days after written notice
is delivered to Fourth: (a) there shall have been any material
breach of any of the material obligations, covenants, or warranties
of Fourth hereunder; or (b) there shall have been any written
representation or statement furnished by Fourth hereunder which at
the time furnished is false or misleading in any material respect
in relation to the size and scope of the transactions contemplated
by this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1. Effect of Closing. Except as provided in this
Section, closing of the transactions contemplated by this Agreement
shall not prejudice any claim for damages which any of the parties
hereto may have hereunder in law or in equity, due to a material
default in observance or the due and timely performance of any of
the covenants and agreements herein contained or for the material
breach of any warranty or representation hereunder, unless such
observance, performance, warranty, or representation is
specifically waived in writing by the party making such claim. In
the event any warranty or representation contained herein is or
becomes untrue or breached (other than by reason of any fraudulent
misrepresentation or fraudulent breach of warranty or any willful
breach of a covenant) and such breach or misrepresentation is
promptly communicated by First Dodge to Fourth in writing prior to
the Effective Time, Fourth shall have the right, at its sole
option, either to waive such misrepresentation or breach in writing
or to terminate this Agreement, but in either such event, neither
First Dodge, FNB, MBI, either Bank, nor any of the Stockholders
shall be liable to Fourth for any such damages, costs, expenses, or
otherwise by reason of such breach or misrepresentation. In the
event Fourth elects to close the transactions contemplated by this
Agreement notwithstanding the written communication of such breach
or misrepresentation to Fourth by First Dodge, Fourth shall be
deemed to have waived such breach or misrepresentation in writing.
8.2. General Indemnification. Subject to the
limitations on the liability of Stockholders contained in this
Article VIII, Stockholders shall be liable for, and shall defend,
save, indemnify, and hold harmless Fourth, BANK IV Kansas, BANK IV
Oklahoma, and their respective officers, directors, employees, and
agents, and each of them (hereinafter individually referred to as
an "Indemnitee" and collectively as "Indemnitees") against and with
respect to any losses, liabilities, claims, diminution in value,
litigation, demands, damages, costs, charges, legal fees, suits,
actions, proceedings, judgments, expenses, or any other losses
(including without limitation any income tax consequences of the
receipt of any indemnification payment) (herein collectively
referred to as "Indemnifying Losses") that may be sustained,
suffered, or incurred by, or obtained against, any Indemnitee
arising from or by reason of the breach or nonfulfillment of any of
the warranties, agreements, or representations made by the
Stockholders, or any of them, in this Agreement; provided, however
that the liability of Stockholders to defend, save, indemnify, and
hold harmless any of the Indemnitees for any liabilities, claims,
or demands indemnified under this Agreement, shall be limited to
the amount by which all such Indemnifying Losses exceed $240,000 in
the aggregate, net of income tax effect and after taking into
account all available insurance proceeds. It is agreed that the
indemnification obligations of the Stockholders shall be solely for
the benefit of the Indemnitees and may not be enforced by any
insurer under any subrogation or similar agreement or arrangement
or by any governmental agency except as a receiver for any
Indemnitee.
8.3. Procedure. If any claim or demand shall be made
or liability asserted against any Indemnitee, or if any litigation,
suit, action, or administrative or legal proceedings shall be
instituted or commenced in which any Indemnitee is involved or
shall be named as a defendant either individually or with others,
and if such Litigation, claim, demand, liability, suit, action, or
proceeding, if successfully maintained, will result in any
Indemnifying Losses as defined in Section 8.2, Fourth shall give
Stockholders written notice thereof within 20 days after it
acquires knowledge thereof. If, within 20 days after the giving of
such notice, Fourth receives written notice from Stockholders (by
the Agents, as defined in Section 9.5, acting for all Stockholders
jointly) stating that Stockholders dispute or intend to defend
against such claim, demand, liability, suit, action, or proceeding,
then Stockholders shall have the right to select counsel of their
choice and to dispute or defend against or settle such claim at
their expense, and the Indemnitees shall fully cooperate with
Stockholders in such dispute or defense or settlement so long as
Stockholders are conducting such dispute or defense diligently and
in good faith. If no such notice of intent to dispute or defend is
received by Fourth within the aforesaid 20-day period, of if such
diligent and good faith defense is not being, or ceases to be,
conducted, Fourth shall have the right, directly or through one or
more of the Indemnitees, to dispute and defend against the claim,
demand, or other liability at the cost and expense of Stockholders,
to settle such claim, demand, or other liability, together with
interest or late charges thereon, and in either event to be
indemnified as provided in this Agreement so long as Fourth
conducts such defense diligently and in good faith; provided,
notice of any proposed settlement shall be given to Stockholders as
far in advance as practicable under the circumstances and, if
Stockholders shall timely object to the terms of such proposed
settlement, they may assume the defense in accordance with the
terms of this Section 8.3. If any event shall occur that would
entitle Indemnitees to a right of indemnification hereunder, any
loss, damage, or expense subject to indemnification shall be
subject to the limitations otherwise set forth in this Article
VIII.
8.4. Survival of Representations and Warranties.
Notwithstanding any rule of law or provision of this Agreement to
the contrary, the representations and warranties of Stockholders
contained in this Agreement and not waived pursuant to the terms of
this Agreement shall survive the Mergers and the closing of the
transactions described in this Agreement; provided, however, that
no claim by an Indemnitee for indemnification or breach of warranty
under this Agreement shall be valid unless an Indemnitee shall have
given written notice of its assertion or claim to Stockholders on
or prior to the date on which Fourth files or is required to file
with the SEC its Annual Report on Form 10-K for the year ended
December 31, 1994, whichever is earlier.
8.5. Several Liability of Stockholders. The liability
of the Stockholders under this Agreement shall not be joint, but
rather shall be several in proportion to the aggregate amount of
Fourth Stock each such Stockholder receives for the stock being
exchanged pursuant to this Agreement and the Merger Agreements as
compared to the total amount of Fourth Stock being received by all
First Dodge, MBI, and First National stockholders. The liability
of each such Stockholder under this Agreement shall be limited to
the sum of the value of Fourth Stock and cash for fractional
shares, if any, received by such Stockholder under this Agreement
and the Merger Agreements. For the purposes of this Section 8.5,
the Fourth Stock received by Stockholders shall be deemed to have
the same value as the reported closing price thereof in the NASDAQ
quotation system on the date in which the Effective Time occurs.
8.6. Indemnification Payments. All indemnification
obligations of the Stockholders under this Article VIII shall be
satisfied by payment in Fourth Stock which will be deemed to have
the same value as the reported closing price thereof in the NASDAQ
quotation system on the date in which the Effective Time occurs.
ARTICLE IX
MISCELLANEOUS
9.1. Expenses. Whether or not the Mergers are
effected, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense.
9.2. Affiliates' Agreements. Prior to the Effective
Time, First Dodge shall deliver to Fourth a list, reviewed by its
counsel, identifying all of the stockholders who are, in its
opinion, Affiliates of First Dodge, MBI, or First National. First
Dodge, MBI, and First National shall each use its Best Efforts to
cause each of its stockholders who is identified by it as being an
Affiliate to execute a written agreement, on or before the
Effective Time, in a form substantially similar to the form of
Affiliate's Agreement attached hereto as Exhibit "G". Fourth shall
not be obligated to deliver any shares of Fourth Stock to any
person who is named as an Affiliate on such list prior to receipt
of such an agreement.
9.3. Notices. All notices or other communications
required or permitted hereunder shall be sufficiently given if
personally delivered or if sent by certified or registered mail,
postage prepaid, return receipt requested, addressed as follows:
(a) if to Fourth, addressed to Darrell G. Knudson, Chairman of the
Board, Post Office Box 4, Wichita, Kansas 67201; and (b) if to
First Dodge, FNB, MBI, First National, Metro Bank, and the
Stockholders, addressed to John V. Harding, 619 Second Avenue,
Dodge City, Kansas 67801, or to such other address as shall have
been furnished in writing in the manner provided herein for giving
notice.
9.4. Stockholders' Agreements. Each Stockholder agrees
not to sell, pledge, encumber, or otherwise hypothecate or transfer
any shares of capital stock of any class of any of the Corporations
prior to the Effective Time unless the transferee or pledgee agrees
with Fourth in writing to be bound by this Agreement and to vote
all shares of such stock owned by him or her in favor of approval
of this Agreement and the Merger Agreements.
9.5. Power of Attorney. Each Stockholder irrevocably
appoints each of the other Stockholders, jointly (the "Agents"),
the agents and attorneys-in-fact of such Stockholder for the
purposes of acting in the name and stead of such Stockholder in:
(i) giving and receiving all notices permitted or required by this
Agreement; (ii) agreeing with Fourth, BANK IV Kansas, and BANK IV
Oklahoma as to any amendments to this Agreement and the Merger
Agreements which the Agents may deem necessary or advisable,
including but not limited to the extension of time in which to
consummate the transactions contemplated by this Agreement, and the
waiver of any closing conditions; (iii) employing legal counsel;
(iv) paying any legal and any other fees and expenses incurred by
the Agents in consummating the transactions contemplated by this
Agreement; and (v) making, executing, acknowledging, and delivering
all such contracts, orders, receipts, notices, requests,
instructions, certificates, letters, and other writings, and in
general doing all things and taking all actions which the Agents,
in their sole discretion, may consider necessary or proper in
connection with or to carry out the terms of this Agreement, as
fully as if such Stockholders were personally present and acting.
This power of attorney and all authority conferred hereby is
granted and conferred subject to the interests of Fourth, BANK IV
Kansas, BANK IV Oklahoma, First Dodge, FNB, MBI, the Banks, and the
other Stockholders who are parties to this Agreement, and in
consideration of those interests and for the purpose of completing
the transactions contemplated hereby, this power of attorney and
all authority conferred hereby shall be irrevocable and shall not
be terminated by any Stockholder or by operation of law, whether by
the death, incompetency, or incapacity of the Stockholders, or any
of them, or by the occurrence of any other event. If any
Stockholder should die or become incompetent or incapacitated, or
any other event should occur before the consummation of the
transactions contemplated by this Agreement, all actions taken by
the Agents pursuant to this Agreement shall be as valid as if such
death, incompetence, or incapacity or other event had not occurred,
regardless of whether Fourth, BANK IV Kansas, BANK IV Oklahoma,
First Dodge, FNB, MBI, First National, Metro Bank, or the Agents,
or any of them, shall have received notice of such death,
incompetence, incapacity, or other event. Each Stockholder agrees
to hold the Agents, and each of them, free and harmless from any
and all loss, damage, expense, or liability which they, he, or she
may sustain or incur as a result of any action taken or not taken
in good faith hereunder. Any Agent shall have the power to act
alone hereunder.
9.6. Time. Time is of the essence of this Agreement.
9.7. Law Governing. This Agreement shall, except to
the extent federal law is applicable, be construed in accordance
with and governed by the laws of the State of Kansas, without
regard to the principles of conflicts of laws thereof.
9.8. Entire Agreement; Amendment. This Agreement
contains and incorporates the entire agreement and understanding of
the parties hereto with respect to the subject matter hereof and
supersedes all prior negotiations, agreements, letters of intent,
and understandings. This Agreement may only be amended by an
instrument in writing duly executed by all corporate parties hereto
and the Stockholders (by the Agents acting for all Stockholders
jointly), and all attempted oral waivers, modifications, and
amendments shall be ineffective.
9.9. Successors and Assigns. The rights and
obligations of the parties hereto shall inure to the benefit of and
shall be binding upon the successors and permitted assigns of each
of them; provided, however, that this Agreement, the Merger
Agreements, or any of the rights, interests, or obligations
hereunder or thereunder may not be assigned by any of the parties
hereto without the prior written consent of the other parties
hereto.
9.10. Cover, Table of Contents, and Headings. The
cover, table of contents, and the headings of the sections and
subsections of this Agreement and the Merger Agreements are for
convenience of reference only and shall not be deemed to be a part
hereof or thereof or taken into account in construing this
Agreement or the Merger Agreements.
9.11. Counterparts. This Agreement and the Merger
Agreements may be executed in one or more counterparts, each of
which shall be deemed an original but which together shall
constitute but one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed.
FOURTH FINANCIAL CORPORATION FIRST DODGE CITY
BANCSHARES, INC.
By /s/ Darrell G. Knudson By /s/John V. Harding
-------------------------- --------------------------
Darrell G. Knudson John V. Harding
Chairman of the Board Chairman of the Board
"Fourth" "First Dodge"
FIRST NATIONAL BANCSHARES METRO BANCSHARES, INC.
OF DODGE CITY, INC.
By /s/ John V. Harding By /s/ John V. Harding
------------------- ----------------
John V. Harding John V. Harding
"FNB" "MBI"
METRO BANK OF BROKEN ARROW FIRST NATIONAL BANK AND TRUST
COMPANY IN DODGE CITY
By /s/ John V. Harding By /s/ John V. Harding
------------------ --------------------
John V. Harding John V. Harding
By /s/ Paul W. Anderson
--------------------
Paul W. Anderson
"Metro Bank" "First National"
[signatures continued]
/s/Thomas P. Shirley /s/John V. Harding
- ------------------- -------------------
Thomas P. Shirley John V. Harding
VIDA EBENER REVOCABLE TRUST
By /s/Vida Ebener, Trustee
-----------------------
Vida Ebener
"Stockholders"
EXHIBIT "A"
AGREEMENT TO MERGE
between
BANK IV KANSAS, NATIONAL ASSOCIATION,
and
FIRST NATIONAL BANK AND TRUST COMPANY IN DODGE CITY
under the charter of
BANK IV KANSAS, NATIONAL ASSOCIATION
under the title of
BANK IV KANSAS, NATIONAL ASSOCIATION
THIS AGREEMENT made among BANK IV Kansas, National
Association (hereinafter referred to as "BANK IV"), a banking
association organized under the laws of the United States, being
located at 100 North Broadway, City of Wichita, County of
Sedgwick, in the State of Kansas, with a capital of
$356,457,292.74 divided into 9,254,200 shares of common stock,
each of $5.00 par value, and surplus of $218,601,457.92 and
undivided profits, including capital reserves, of $91,584,834.82
as of December 31, 1993, and First National Bank and Trust
Company in Dodge City, a national banking association organized
under the laws of the United States (hereinafter referred to as
"First National") being located at 619 Second, Dodge City, County
of Ford, in the State of Kansas, with a capital of $600,000,
divided into 6,000 shares of common stock, each of $100.00 par
value, and surplus of $_________ and undivided profits, including
capital reserves, of $_________ as of December 31, 1993, each
acting pursuant to a resolution of its board of directors,
adopted by the vote of a majority of its directors, pursuant to
the authority given by and in accordance with the provisions of
the Act of November 7, 1918, as amended (12 USC Section 215a).
W I T N E S S E T H: That,
Section 1. First National shall be merged into BANK IV
under the charter of the latter.
Section 2. The name of the receiving association
(hereinafter referred to as the "Association") shall be BANK IV
Kansas, National Association.
Section 3. The business of the Association shall be
that of a national banking association. This business shall be
conducted by the Association at its main office which shall be
located at 100 North Broadway, Wichita, Kansas, and at its
legally established branches.
Section 4. The amount of capital stock of the
Association shall be $46,871,000, divided into 9,374,200 shares
of common stock, each of $5.00 par value, and at the time the
merger shall become effective, the Association shall have a
surplus of $___________, and undivided profits, including capital
reserves, which when combined with the capital and surplus will
be equal to the combined capital structures of the merging banks
as stated in the preamble of this Agreement, adjusted, however,
for normal earnings and expenses (and if applicable, purchase
accounting adjustments) between December 31, 1993, and the
effective time of the merger. The amount of capital stock of the
Association and its surplus and undivided profits at the time the
merger becomes effective shall also be adjusted to reflect the
effect of all mergers of other banks into the Association, if
any, between December 31, 1993 and the effective time of the
merger.
Section 5. All assets as they exist at the effective
time of the merger shall pass to and vest in the Association
without any conveyance or other transfer. The Association shall
be responsible for all of the liabilities of every kind and
description, including liabilities arising from the operation of
a trust department, of each of the merging entities existing as
of the effective time of the merger.
Section 6. Of the capital stock of the Association,
the presently outstanding 9,254,200 shares of common stock, each
of $5.00 par value, the holder of it, Fourth Financial
Corporation, shall retain its present rights. In addition,
Fourth Financial Corporation shall receive an additional 120,000
shares of common stock of the Association by reason of the
merger. Upon the merger becoming effective, the shares of
capital stock of First National shall no longer be outstanding
and the sole right of the holders thereof, other than Fourth
Financial Corporation, shall be to exchange such shares for 95.92
shares of common stock of Fourth Financial Corporation, par value
$5.00 per share, for each share of capital stock of First
National so exchanged.
Section 7. Except as expressly permitted in an
Agreement and Plan of Reorganization dated as of February 2,
1994, among Fourth Financial Corporation, First National, First
Dodge City Bancshares, Inc., First National Bancshares of Dodge
City, Inc., Metro Bancshares, Inc., Metro Bank of Broken Arrow,
and the stockholders of First Dodge City Bancshares, Inc. (the
"Reorganization Agreement"), First National shall not (i) declare
or pay any dividend to its shareholders, (ii) dispose of any of
its assets in any other manner except in the normal course of
business and for adequate value, or (iii) take any other action
which would violate the terms of the Reorganization Agreement.
Section 8. The present board of directors and officers
of BANK IV shall continue to serve as the board of directors and
officers of the Association until the next annual meeting or
until such time as their successors have been elected and have
qualified.
Section 9. Effective as of the time this merger shall
become effective as specified in the merger approval to be issued
by the Comptroller of the Currency, the articles of association
of BANK IV as then in effect shall be the articles of association
of the resulting bank.
Section 10. This Agreement may be terminated as
provided in the Reorganization Agreement. Notwithstanding the
approval of this Agreement by any stockholder group, this
Agreement shall automatically terminate upon the termination of
the Reorganization Agreement for any reason, and in no event
shall the merger of First National into BANK IV occur prior to
the consummation of the other Mergers as such term is defined in
the Reorganization Agreement.
Section 11. This Agreement shall be ratified and
confirmed by the affirmative vote of stockholders of each of the
merging banks owning at least two-thirds of its capital stock
outstanding, at a meeting to be held on the call of the
directors; and the merger shall become effective at the time
specified in a merger approval to be issued by the Comptroller of
the Currency of the United States.
WITNESS, the signatures and seals of said merging
entities as of the ___ day of February 1994, each set by its
chairman of the board, president, or a vice president and
attested to by its cashier or secretary, pursuant to a resolution
of its board of directors, acting by a majority:
BANK IV KANSAS,
NATIONAL ASSOCIATION
Attest:
By /s/ K. Gordon Greer
/s/ John C. Maloney -------------------------
- ------------------------- K. Gordon Greer,
John C. Maloney, Secretary Chairman of the Board
and President
[Seal of Bank]
FIRST NATIONAL BANK AND TRUST
COMPANY IN DODGE CITY
By
--------------------------
________________, President
Attest:
_______________________
______________, Secretary
[Seal of Bank]
STATE OF KANSAS )
) SS:
SEDGWICK COUNTY )
On this _____ day of February, 1994, before me, a
notary public for this state and county, personally came K.
Gordon Greer, as chairman of the board and president, and John C.
Maloney, as secretary, of BANK IV Kansas, National Association, a
national banking association, and each in his capacity
acknowledged this instrument to be the act and deed of the
association and the seal affixed to it to be its seal.
WITNESS my official seal and signature this day and
year.
----------------------------
Notary Public
My Appointment Expires:
- -----------------------
STATE OF KANSAS )
) SS:
FORD COUNTY )
On this ____ day of February, 1994, before me, a notary
public for this state and county, personally came
________________ as president, and ______________ as secretary of
The First National Bank and Trust Company in Dodge City, a
national banking association, and each in his/her capacity
acknowledged this instrument to be the act and deed of the bank
and the seal affixed to it to be its seal.
WITNESS my official seal and signature this day and
year.
----------------------------
Notary Public
My Appointment Expires:
- -----------------------
EXHIBIT "B"
AGREEMENT TO MERGE
between
BANK IV OKLAHOMA, NATIONAL ASSOCIATION
and
METRO BANK OF BROKEN ARROW
under the charter of
BANK IV OKLAHOMA, NATIONAL ASSOCIATION
under the title of
BANK IV OKLAHOMA, NATIONAL ASSOCIATION
THIS AGREEMENT made between BANK IV Oklahoma, National
Association (hereinafter referred to as "BANK IV"), a banking
association organized under the laws of the United States, being
located at 515 South Boulder, City of Tulsa, County of Tulsa, in
the State of Oklahoma, with a capital of $190,712,286.07 divided
into 5,720,647 shares of common stock, each of $5.00 par value,
and surplus of $133,050,335.55 and undivided profits, including
capital reserves, of $29,058,715.74 as of December 31, 1993, and
Metro Bank of Broken Arrow (hereinafter referred to as "Metro"),
a banking corporation organized under the laws of the State of
Oklahoma, being located at 1800 S. Elm Place, Broken Arrow, Tulsa
County, in the State of Oklahoma, with a capital of $762,500,
divided into 305,000 shares of common stock, each of $2.50 par
value, and surplus and undivided profits of approximately
$__________ as of December 31, 1993, each acting pursuant to a
resolution of its board of directors, adopted by the vote of a
majority of its directors, pursuant to the authority given by and
in accordance with the provisions of the Act of November 7, 1918,
as amended (12 USC 215a).
W I T N E S S E T H: That,
Section 1. Metro shall be merged into BANK IV under
the charter of the latter.
Section 2. The name of the receiving association
(hereinafter referred to as the "Association") shall be BANK IV
Oklahoma, National Association.
Section 3. The business of the Association shall be
that of a national banking association. This business shall be
conducted by the Association at its main office which shall be
located at 515 South Boulder, Tulsa, Oklahoma, and at its legally
established branches.
Section 4. The amount of capital stock of the
Association shall be $29,365,735 divided into 5,873,147 shares of
common stock, each of $5.00 par value, and at the time the merger
shall become effective, the Association shall have a surplus of
$___________, and undivided profits, including capital reserves,
which when combined with the capital and surplus will be equal to
the combined capital structures of the merging banks as stated in
the preamble of this Agreement, adjusted, however, for normal
earnings and expenses (and if applicable, purchase accounting
adjustments) between December 31, 1993, and the effective time of
the merger. The amount of capital stock of the Association and
its surplus and undivided profits at the time the merger becomes
effective shall also be adjusted to reflect the effect of all
mergers of other banks into the Association, if any, between
December 31, 1993 and the effective time of the merger.
Section 5. All assets as they exist at the effective
time of the merger shall pass to and vest in the Association
without any conveyance or other transfer. The Association shall
be responsible for all of the liabilities of every kind and
description, including liabilities arising from the operation of
a trust department, of Metro existing as of the effective time of
the merger.
Section 6. Of the capital stock of the Association,
the presently outstanding 5,720,647 shares of common stock, each
of $5.00 par value, the two holders of it, Fourth Financial
Corporation and IV Commercial Acquisition, Inc., shall retain
their present rights. In addition, Fourth Financial Corporation
shall receive by reason of the merger an additional 152,500
shares of common stock, par value $5.00 per share of the
Association. The sole shareholder of Metro, Metro Bancshares,
Inc. ("MBI"), is a party to an Agreement and Plan of
Reorganization, among Fourth Financial Corporation, MBI, First
Dodge City Bancshares, Inc. ("First Dodge"), Metro, First
National Bancshares of Dodge City, Inc., First National Bank and
Trust Company in Dodge City, and the stockholders of First Dodge,
dated as of February 2, 1994 (the "Reorganization Agreement"),
pursuant to which the stockholders of MBI and First Dodge are
receiving full payment for the value of all of the issued and
outstanding capital stock of MBI and First Dodge, so no separate
consideration is to be paid to Metro or any of its shareholders
in such capacity by reason of the merger effected hereby.
Section 7. Except as expressly permitted in the
Reorganization Agreement, Metro shall not (i) declare or pay any
dividend to its shareholders, (ii) dispose of any of its assets
in any other manner except in the normal course of business and
for adequate value, or (iii) take any other action which would
violate the terms of the Reorganization Agreement.
Section 8. The present board of directors and officers
of BANK IV shall continue to serve as the board of directors and
officers of the Association until the next annual meeting or
until such time as their successors have been elected and have
qualified.
Section 9. Effective as of the time this merger shall
become effective as specified in the merger approval to be issued
by the Comptroller of the Currency, the articles of association
of the resulting bank shall be the Articles of Association of
BANK IV.
Section 10. This Agreement may be terminated as
provided in the Reorganization Agreement. Notwithstanding the
approval of this Agreement by any shareholder group, this
Agreement shall automatically terminate upon the termination of
the Reorganization Agreement for any reason, and in no event
shall the merger of Metro into BANK IV occur prior to the
consummation of the other Mergers as such term is defined in the
Reorganization Agreement.
Section 11. This Agreement shall be ratified and
confirmed by the affirmative vote of shareholders of each of the
merging banks owning at least two-thirds of its capital stock
outstanding, at a meeting to be held on the call of the
directors; and the merger shall become effective at the time
specified in a merger approval to be issued by the Comptroller of
the Currency of the United States.
WITNESS, the signatures and seals of said merging banks
this ___ day of February, 1994, each set by its chairman of the
board, president, or a vice president and attested to by its
cashier or secretary, pursuant to a resolution of its board of
directors, acting by a majority:
BANK IV OKLAHOMA,
NATIONAL ASSOCIATION
Attest:
By
-------------------------
_______________________ Ronald L. Baldwin
Lisa R. Carr, Secretary President
[Seal of Bank]
Metro Bank of Broken Arrow
Attest:
By
----------------------------
___________________________ _______________
_____________, Secretary President
[Seal of Bank]
STATE OF OKLAHOMA )
) SS:
TULSA COUNTY )
On this ____ day of February, 1994, before me, a notary
public for this state and county, personally came Ronald L.
Baldwin, President, and Lisa R. Carr as Secretary, of BANK IV
Oklahoma, National Association, and each in his/her capacity
acknowledged this instrument to be the act and deed of the
association and the seal affixed to it to be its seal.
WITNESS my official seal and signature this day and
year.
----------------------------
My Appointment Expires: Notary
- -----------------------
STATE OF OKLAHOMA )
) SS:
TULSA COUNTY )
On this ___ day of February, 1994, before me, a notary
public for this state and county, personally came _______________
as President, and _____________ as Secretary of Metro Bank of
Broken Arrow, an Oklahoma banking corporation, and each in
his/her capacity acknowledged this instrument to be the act and
deed of the association and the seal affixed to it to be its
seal.
WITNESS my official seal and signature this day and
year.
----------------------------
My Appointment Expires: Notary Public
- -----------------------
APPENDIX "C"
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, made as of the ____ day of
_______ 1994, among FOURTH FINANCIAL CORPORATION, a Kansas
corporation ("Fourth"); FIRST DODGE CITY BANCSHARES, INC., a
Kansas corporation ("First Dodge"); FIRST NATIONAL BANCSHARES OF
DODGE CITY, INC., a Kansas corporation ("FNB"); and METRO
BANCSHARES, INC., an Oklahoma corporation ("MBI"). Fourth, First
Dodge, FNB, and MBI are hereinafter sometimes referred to as the
"Constituent Corporations;" First Dodge, FNB, and MBI are
hereinafter sometimes referred to as the "Merging Corporations");
and Fourth is hereinafter sometimes called the "Surviving
Corporation."
Recitals
--------
A. The respective Boards of Directors of each of the
four Constituent Corporations have duly adopted resolutions
approving the adoption of an Agreement and Plan of
Reorganization, dated as of February 2, 1994, among Fourth, First
Dodge, FNB, MBI, Metro Bank of Broken Arrow, First National Bank
and Trust Company in Dodge City, and First Dodge's stockholders
(the "Agreement and Plan of Reorganization") and this Agreement
of Merger, subject, among other things, to the approval and
adoption of the Agreement and Plan of Reorganization and this
Agreement of Merger by the holders of at least a majority of the
issued and outstanding capital stock of each class of the Merging
Corporations having voting rights, authorizing the proposed
merger of the Merging Corporations into Fourth upon the terms and
conditions herein set forth.
B. No approval of the stockholders of Fourth of this
Agreement is required by reason of K.S.A. Section 17-6702(e) and
17-
6701(f).
NOW, THEREFORE, Fourth and each of the Merging
Corporations hereby agree that Fourth and the Merging
Corporations shall merge on the terms and conditions hereinafter
provided and in accordance with the following plan:
Plan of Merger
--------------
1. First Dodge, FNB, and MBI shall simultaneously
merge with and into Fourth which shall continue as the Surviving
Corporation and shall be governed by the laws of the State of
Kansas (the "Merger"). At the Effective Time (as defined in
Paragraph 6), the separate existences of each of the Merging
Corporations shall cease. The corporate identity, existence,
purposes, franchises, powers, rights, and immunities of Fourth
shall continue unaffected and unimpaired by the Merger, and the
corporate identity, existence, purposes, franchises, powers,
rights, and immunities of each of the Merging Corporations shall
be merged into Fourth which shall be fully vested therewith. It
is the intention of the parties that the transaction contemplated
by this Agreement of Merger shall qualify as a tax-free
reorganization under Section 368 of the Internal Revenue Code of
1986, as amended.
2. The Articles of Incorporation and Bylaws of
Fourth, as in effect on the Effective Time, shall be and remain
the articles of incorporation and bylaws of the Surviving
Corporation until thereafter amended as provided by law.
3. At the Effective Time:
(a) Fourth shall, without other transfer, succeed
to and possess all the rights, privileges, powers, and
franchises both of a public and private nature and
shall be subject to all the restrictions, disabilities,
debts, liabilities, and duties of each of the
Constituent Corporations.
(b) The rights, privileges, powers, and
franchises of each of the Constituent Corporations and
all property, real, personal and mixed, of and all
debts due or belonging to any of the Constituent
Corporations shall be vested in Fourth; and all
property, rights, privileges, powers, and franchises,
and all and every other interest shall be thereafter as
effectually the property of Fourth as they were of any
of the Constituent Corporations.
(c) Title to any real estate and to any other
property vested by deed or otherwise in any of the
Constituent Corporations shall not revert or be in any
way impaired by reason of the Merger or the statutes
providing therefor; provided, however, that all rights
of creditors and all liens upon the property of any of
the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities, and duties of
all of the Constituent Corporations shall thenceforth
attach to Fourth and may be enforced against it to the
same extent as if they had been incurred or contracted
by Fourth. After the Effective Time, the Constituent
Corporations shall each execute or cause to be executed
such further assignments, assurances, or other
documents as may be necessary or desirable to confirm
title to their respective properties, assets, and
rights in Fourth or to otherwise carry out the purposes
of this Agreement of Merger, and their respective
officers and directors shall do all such acts and
things to accomplish those purposes which Fourth may
reasonably request.
4. At the Effective Time:
(a) Each issued and outstanding share of each
class of capital stock of each of the Merging
Corporations shall cease to be an issued and existing
share.
(b) Each share of common stock of First Dodge and
MBI shall automatically be converted into and exchanged
for shares of common stock of Fourth ("Fourth Stock")
as follows:
No. of Shares
of Fourth Stock
---------------
First Dodge Common Stock,
par value $1 per share . . . . . . . . 112.42
MBI Common Stock, par
value $.10 per share . . . . . . . . . 0.30
(c) No share of Fourth Stock shall be issued in
exchange for any shares of any other class of capital
stock of any of the Merging Corporations, as all of
such shares are owned, directly or indirectly, by First
Dodge and the value of each thereof is fully reflected
in the number of shares being issued with respect to
First Dodge common stock.
(d) Until surrendered for exchange, each
outstanding stock certificate which prior to the
Effective Time represented common stock of First Dodge
or MBI shall be deemed for all corporate purposes to
represent the right to receive the number of shares of
Fourth Stock into which the shares have been so
converted; provided, that in any matters relating to
the shares represented by such certificates, Fourth may
rely conclusively upon the record of stockholders
maintained by First Dodge and MBI containing the names
and addresses of the holders of record of such stock at
the Effective Time. Unless and until such outstanding
stock certificates formerly representing shares of
common stock of First Dodge or MBI are so surrendered,
no dividend payable to the holders of record of Fourth
Stock, as of any date subsequent to the Effective Time,
shall be paid to the holder of such outstanding
certificates in respect thereof. Upon surrender of
such outstanding certificates (or, in the case of lost
certificates, upon receipt of a surety bond or other
form of indemnification satisfactory to Fourth),
however, the former First Dodge or MBI stockholders
shall receive certificates evidencing the shares of
Fourth Stock to which they are entitled plus the
accrued dividends on such stock, without interest.
(e) No fractional shares of Fourth Stock will be
issued. Instead, upon surrender of First Dodge or MBI
common stock certificates (or, in the case of lost
certificates, upon receipt of a surety bond or other
form of indemnification which is satisfactory to
Fourth), Fourth will pay, or cause to be paid, to the
holder thereof the cash value of the fractional
interest to which the holder thereof would otherwise be
entitled, based upon the closing price of Fourth Stock
on the last trading day two trading days prior to the
Effective Time as reported in the Southwest Edition of
The Wall Street Journal.
(f) The Merger shall effect no change in the
rights of the holders of Fourth Stock that is
outstanding immediately before the Effective Time.
5. The officers and directors of Fourth at the
Effective Time shall continue to be the officers and directors of
the Surviving Corporation until their successors are duly elected
and qualified or their earlier death, resignation, or removal.
6. The Merger shall be effected by and be given
effect upon the filing of this Agreement of Merger in the offices
of the Secretary of State of Kansas and the Secretary of State of
Oklahoma. Such date and time of filing is referred to in this
Agreement of Merger as the "Effective Time." This Agreement of
Merger shall also be recorded in accordance with the provisions
of the Kansas General Corporation Code and the Oklahoma General
Corporation Act, but such recording shall not be a condition
precedent to its becoming effective.
7. This Agreement of Merger may be terminated and
abandoned by mutual consent of the Boards of Directors of Fourth
and the Merging Corporations at any time prior to the Effective
Time, or by the Board of Directors of either Fourth Financial or
the Merging Corporations (acting jointly) if the Agreement and
Plan of Reorganization shall have been terminated as therein
provided.
8. This Agreement of Merger may be executed in any
number of counterparts, and each such counterpart hereof shall be
deemed to be an original instrument, but all of such counterparts
together shall constitute but one agreement.
IN WITNESS WHEREOF, pursuant to authority duly given by
its Board of Directors, each of the Constituent Corporations has
caused this Agreement of Merger to be executed by its Chairman of
the Board or President and attested by its Secretary or an
Assistant Secretary as of the date and year first above written.
FOURTH FINANCIAL CORPORATION
By
-------------------------------
Darrell G. Knudson
Chairman of the Board
ATTEST:
By
--------------------------------
John C. Maloney, Secretary
[signatures continued]
FIRST DODGE CITY BANCSHARES, INC.
By_______________________________
ATTEST: _______________________________
Chairman of the Board
By____________________________
, Secretary
FIRST NATIONAL BANCSHARES OF
DODGE
CITY, INC.
ATTEST:
By_______________________________
_______________________________
By____________________________ President
, Secretary
METRO BANCSHARES, INC.
ATTEST:
By_______________________________
_______________________________
By____________________________ President
, Secretary
ACKNOWLEDGMENTS
---------------
STATE OF KANSAS )
) ss:
SEDGWICK COUNTY )
BE IT REMEMBERED that on this ____ day of ________ 1994,
personally came before me, a Notary Public, in and for the county
and state aforesaid, Darrell G. Knudson and John C. Maloney,
Chairman of the Board and Secretary, respectively, of Fourth
CORPORATION, a Kansas corporation, both of whom are personally
known to me and personally known to me to be the said officers of
said corporation, and they each separately duly executed the above
and foregoing Agreement of Merger before me and acknowledged the
said Agreement of Merger to be their act and deed and the act and
deed of said corporation; that the facts stated therein are true;
that the signature of the chairman of the board of said corporation
to the foregoing Agreement of Merger is in the handwriting of said
chairman of the board of said corporation, and that its seal
affixed to said Agreement of Merger, and attested by the secretary
of said corporation, is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
of office the day and year aforesaid.
---------------------------------
Notary Public
My Appointment Expires:
- ----------------------
STATE OF KANSAS )
) ss:
FORD COUNTY )
BE IT REMEMBERED that on this _____ day _______, 1994,
personally came before me, a Notary Public, in and for the county
and state aforesaid, ______________________ and ______________,
Chairman of the Board and Secretary, respectively, of FIRST DODGE
CITY BANCSHARES, INC., a Kansas corporation, both of whom are
personally known to me and personally known to me to be the said
officers of said corporation, and they each separately duly
executed the above and foregoing Agreement of Merger before me and
acknowledged the said Agreement of Merger to be their act and deed
and the act and deed of said corporation; that the facts stated
therein are true; that the signature of the chairman of the board
of said corporation to the foregoing Agreement of Merger is in the
handwriting of said chairman of the board of said corporation, and
that its seal affixed to said Agreement of Merger, and attested by
the secretary of said corporation, is the corporate seal of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
of office the day and year aforesaid.
---------------------------------
Notary Public
My Appointment Expires:
- ----------------------
STATE OF KANSAS )
) ss:
FORD COUNTY )
BE IT REMEMBERED that on this _____ day _______, 1994,
personally came before me, a Notary Public, in and for the county
and state aforesaid, ______________________ and ______________,
President and Secretary, respectively, of FIRST NATIONAL BANCSHARES
OF DODGE CITY, INC., a Kansas corporation, both of whom are
personally known to me and personally known to me to be the said
officers of said corporation, and they each separately duly
executed the above and foregoing Agreement of Merger before me and
acknowledged the said Agreement of Merger to be their act and deed
and the act and deed of said corporation; that the facts stated
therein are true; that the signature of the president of said
corporation to the foregoing Agreement of Merger is in the
handwriting of said president of said corporation, and that its
seal affixed to said Agreement of Merger, and attested by the
secretary of said corporation, is the corporate seal of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
of office the day and year aforesaid.
---------------------------------
Notary Public
My Appointment Expires:
- ----------------------
STATE OF OKLAHOMA )
) ss:
TULSA COUNTY )
BE IT REMEMBERED that on this _____ day _______, 1994,
personally came before me, a Notary Public, in and for the county
and state aforesaid, ______________________ and ______________,
President and Secretary, respectively, of METRO BANCSHARES, INC.,
an Oklahoma corporation, both of whom are personally known to me
and personally known to me to be the said officers of said
corporation, and they each separately duly executed the above and
foregoing Agreement of Merger before me and acknowledged the said
Agreement of Merger to be their act and deed and the act and deed
of said corporation; that the facts stated therein are true; that
the signature of the president of said corporation to the foregoing
Agreement of Merger is in the handwriting of said president of said
corporation, and that its seal affixed to said Agreement of Merger,
and attested by the secretary of said corporation, is the corporate
seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
of office the day and year aforesaid.
---------------------------------
Notary Public
My Appointment Expires:
- ----------------------
CERTIFICATES
------------
The undersigned, ______________, Secretary of FIRST DODGE
CITY BANCSHARES, INC., a Kansas corporation, on behalf of said
corporation, hereby certifies, pursuant to K.S.A. Section 17-6702
of the
General Corporation Code of the State of Kansas, that the foregoing
Agreement of Merger to which this Certificate is attached has been
submitted to the stockholders of said corporation at a special
meeting
thereof, duly called and held in accordance with the Bylaws of said
corporation and the General Corporation Code of the State of
Kansas,
on the ____ day of _______, 1994, and at said meeting said
agreement
was duly considered, adopted, and approved by the holders of a
majority of each class of capital stock entitled to vote thereon
pursuant to a vote by ballot in person or by proxy taken for the
adoption or rejection of said Agreement of Merger, and the votes of
the stockholders of said corporation representing _________ shares
of
Common Stock, being _____% of the issued and outstanding Common
Stock
of said corporation, entitled to vote were for the approval and
adoption of said agreement and voted therefor.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate on the _____ day of ________, 1994.
---------------------------------
______________, Secretary
STATE OF KANSAS )
) ss:
FORD COUNTY )
BE IT REMEMBERED that on this ___ day of ________, 1994,
personally came before me, a Notary Public, in and for the county
and
state aforesaid, ______________, Secretary of FIRST DODGE CITY
BANCSHARES, INC., a Kansas corporation, who is personally known to
me
and personally known to me to be the said officer of said
corporation,
and she duly executed the above and foregoing certificate before me
and acknowledged the said certificate to be her act and deed and
the
act and deed of said corporation; that the facts stated therein are
true; that this signature is that of the secretary of said
corporation, and that its seal affixed to said certificate is the
corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
of
office the day and year aforesaid.
---------------------------------
Notary Public
My Appointment Expires:
- ----------------------
The undersigned, ______________, Secretary of FIRST
NATIONAL
BANCSHARES OF DODGE CITY, INC., a Kansas corporation, on behalf of
said corporation, hereby certifies, pursuant to K.S.A. SECTION
17-6702 of
the General Corporation Code of the State of Kansas, that the
foregoing Agreement of Merger to which this Certificate is attached
has been submitted to the sole stockholder of said corporation and,
by unanimous written consent executed by said sole stockholder on
____________, 1994, in lieu of a special meeting of stockholders in
accordance with the Bylaws of said corporation and the General
Corporation Code of the State of Kansas, said sole stockholder duly
considered, adopted, and approved said Agreement of Merger by
voting
all of the 5,254.50 shares of common stock, par value $1 per share,
that were then issued and outstanding in favor thereof.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate on the ___ day of ________, 1994.
---------------------------------
______________, Secretary
STATE OF KANSAS )
) ss:
FORD COUNTY )
BE IT REMEMBERED that on this ___ day of ________, 1994,
personally came before me, a Notary Public, in and for the county
and
state aforesaid, ______________, Secretary of FIRST NATIONAL
BANCSHARES OF DODGE CITY, INC., a Kansas corporation, who is
personally known to me and personally known to me to be the said
officer of said corporation, and she duly executed the above and
foregoing certificate before me and acknowledged the said
certificate
to be her act and deed and the act and deed of said corporation;
that
the facts stated therein are true; that this signature is that of
the
secretary of said corporation, and that its seal affixed to said
certificate
is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
of
office the day and year aforesaid.
---------------------------------
Notary Public
My Appointment Expires:
- ----------------------
The undersigned, ______________, Secretary of METRO
BANCSHARES, INC., an Oklahoma corporation, on behalf of said
corporation, hereby certifies, pursuant to the General Corporation
Act
of the State of Oklahoma, that the foregoing Agreement of Merger to
which this Certificate is attached has been submitted to the
stockholders of said corporation at a special meeting thereof, duly
called and held in accordance with the Bylaws of said corporation
and
the General Corporation Act of the State of Oklahoma, on the ____
day
of _______, 1994, and at said meeting said agreement was duly
considered, adopted, and approved by the holders of a majority of
each
class of capital stock entitled to vote thereon pursuant to a vote
by
ballot in person or by proxy taken for the adoption or rejection of
said Agreement of Merger, and the votes of the stockholders of said
corporation representing _________ shares of Common Stock, being
_____% of the issued and outstanding Common Stock of said
corporation
and _____ shares of Preferred Stock, being ___% of the issued and
outstanding Preferred Stock, entitled to vote were for the approval
and adoption of said agreement and voted therefor.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate on the ____ day of ________, 1994.
---------------------------------
______________, Secretary
STATE OF OKLAHOMA )
) ss:
TULSA COUNTY )
BE IT REMEMBERED that on this ____ day of ________, 1994,
personally came before me, a Notary Public, in and for the county
and
state aforesaid, ______________, Secretary of METRO BANCSHARES,
INC.,
an Oklahoma corporation, who is personally known to me and
personally
known to me to be the said officer of said corporation, and she
duly
executed the above and foregoing certificate before me and
acknowledged the said certificate to be her act and deed and the
act
and deed of said corporation; that the facts stated therein are
true;
that this signature is that of the secretary of said corporation,
and
that its seal affixed to said certificate is the corporate seal of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
of
office the day and year aforesaid.
--------------------------------
Notary Public
My Appointment Expires:
- ----------------------
The undersigned, John C. Maloney, Secretary of Fourth
Financial Corporation, a Kansas corporation, on behalf of said
corporation, hereby certifies, in accordance with K.S.A. Section
17-6702(e)
and pursuant to K.S.A. Section 17-6701(f) of the General
Corporation Code
of the State of Kansas, that the foregoing Agreement of Merger to
which this Certificate is attached has been duly approved by the
board
of directors of Fourth Financial Corporation and has been duly
adopted
pursuant to Subsection (f) of said K.S.A. Section 17-6701 in that
(i) the
foregoing Agreement of Merger does not amend in any respect the
Articles of Incorporation of Fourth Financial Corporation; (ii)
each
share of stock of Fourth Financial Corporation outstanding
immediately
prior to the effective date of the merger is to be an identical
outstanding or treasury share of the surviving corporation after
the
effective date of the merger; and (iii) the authorized unissued
shares
or the treasury shares of common stock of Fourth Financial
Corporation
to be issued or delivered under the foregoing Agreement of Merger
do
not exceed 20% of the shares of common stock of Fourth Financial
Corporation outstanding immediately prior to the effective date of
the
merger.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate on the ___ day of ___, 1994.
_______________________________
John C. Maloney, Secretary
STATE OF KANSAS )
) ss:
SEDGWICK COUNTY )
BE IT REMEMBERED that on this ____ day of _______, 1993,
personally came before me, a Notary Public, in and for the county
and state aforesaid, John C. Maloney, Secretary of FOURTH FINANCIAL
CORPORATION, a Kansas corporation, who is personally known to me
and personally known to me to be the said officer of said
corporation, and he duly executed the above and foregoing
certificate before me and acknowledged the said certificate to be
his act and deed and the act and deed of said corporation; that the
facts stated therein are true; that this signature is that of the
secretary of said corporation, and that its seal affixed to said
certificate is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
of office the day and year aforesaid.
---------------------------------
Notary Public
My Appointment Expires:
- ----------------------
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
Pursuant to Section 1082 of the Oklahoma General
Corporation Act, Metro Bancshares, Inc., an Oklahoma Corporation,
was merged into Fourth Financial Corporation, a Kansas corporation
and the surviving corporation. Fourth Financial Corporation agrees
that it may be served with process in Oklahoma in any proceeding
for the enforcement of any obligation of Metro Bancshares, Inc., as
well as for enforcement of any obligation of Fourth Financial
Corporation arising from the aforementioned merger, including any
suit or other proceeding to enforce the right of stockholders as
determined in appraisal proceedings pursuant to the provisions of
Section 1091 of the Oklahoma General Corporation Act, and hereby
irrevocably appoints the Secretary of State of the State of
Oklahoma as its agent to accept service of process in any such suit
or other proceedings.
The Secretary of State of the State of Oklahoma shall
mail any such service of process to the following address:
FOURTH FINANCIAL CORPORATION
100 N. Broadway
Wichita, Kansas 67202
IN WITNESS WHEREOF, Fourth Financial Corporation has
caused these presents to be executed by its Chairman of the Board
and Secretary on this ____ day of ________, 1994.
FOURTH FINANCIAL CORPORATION
By
-------------------------------
Darrell G. Knudson
Chairman of the Board
ATTEST:
By
-------------------------------
John C. Maloney, Secretary
STATE OF KANSAS )
) ss:
SEDGWICK COUNTY )
BE IT REMEMBERED that on this ____ day of ________, 1994,
personally came before me, a Notary Public, in and for the county
and state aforesaid, Darrell G. Knudson and John C. Maloney,
Chairman of the Board and Secretary, respectively, of FOURTH
FINANCIAL CORPORATION, a Kansas corporation, both of whom are
personally known to me and personally known to me to be the said
officers of said corporation, and they each separately duly
executed the above and foregoing agreement before me and
acknowledged the said agreement to be their act and deed and the
act and deed of said corporation; that the facts stated therein are
true; that the signature of the chairman of the board of said
corporation to the foregoing agreement is in the handwriting of
said chairman of the board of said corporation, and that its seal
affixed to said agreement, and attested by the secretary of said
corporation, is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal
of office the day and year aforesaid.
---------------------------------
Notary Public
My Appointment Expires:
_________________________
EXHIBIT "E"
CONSULTING AND MARKETING AGREEMENT
THIS AGREEMENT, made and entered into on the __ day of
______, 1994, by and between FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY, a national banking association, with its principal
place of business at Dodge City, Kansas ("Bank"); FOURTH FINANCIAL
CORPORATION, a Kansas corporation ("Fourth Financial"); and JOHN V.
HARDING, hereinafter referred to as "Executive".
W I T N E S S E T H: That,
- - - - - - - - - -
WHEREAS, Fourth Financial, First Dodge City Bancshares,
Inc. ("First Dodge"), First National Bancshares of Dodge City,
Inc., Metro Bancshares, Inc., Metro Bank of Broken Arrow ("Metro
Bank"), Bank, and the stockholders of First Dodge have heretofore
entered into an Agreement and Plan of Reorganization, dated as of
February 2, 1994 (the "Agreement"); and
WHEREAS, the Agreement provides for the execution and
delivery of this Agreement; and
WHEREAS, upon consummation of the transactions
contemplated by the Agreement, the Bank will be merged into a
wholly owned subsidiary of Fourth Financial, BANK IV Kansas,
National Association ("BANK IV"), who will succeed to this
Agreement;
NOW, THEREFORE, in consideration of the premises and the
covenants contained herein, the parties agree as follows:
1. Resignations. Executive hereby resigns all
directorships and all offices he holds with First Dodge and with
any of its subsidiaries, such resignations to be effective at the
Effective Time as such term is defined in the Agreement (the
"Effective Time").
2. Service as Advisory Director of BANK IV. Executive
hereby agrees to serve as an advisory director of the Dodge City,
Kansas market-based bank of BANK IV at the pleasure of the Board of
Directors of BANK IV. It is recognized that Executive's travel
schedule may prevent his regular attendance at meetings.
3. Consulting and Marketing Agreement. (a) Executive
is hereby retained as an independent consultant for a five-year
period commencing at the Effective Time and ending five years
thereafter. His duties shall consist of: (i) giving such advice
and assistance to management of BANK IV as may reasonably be
requested from time to time; (ii) assisting BANK IV in retaining
the customers and goodwill of the Bank; (iii) upon request of BANK
IV devoting at least 15 consecutive days per calendar quarter on
developing new business for BANK IV's commercial loan and trust
department; and (iv) being involved in economic development
activities in the communities of Broken Arrow or Dodge City. It is
expressly understood that, while Executive is expected to devote
substantial time to performing his duties hereunder, he is not
expected or required to keep regular hours or work full-time.
(b) For all services rendered under this Paragraph 3,
Executive shall receive compensation of $155,000 per year. Such
compensation shall be payable in equal quarterly payments payable
on the first business day of each calendar quarter. Executive will
not be an employee of BANK IV and shall not be eligible to
participate in any of its health insurance, life insurance,
retirement, savings, stock option, or other employee benefit
programs.
(c) The provisions of this Paragraph 3 may only be
terminated by BANK IV in the event of material, intentional breach
by Executive of his duties hereunder after giving Executive written
notice and at least 30 days to cure any default that can be cured
by performance.
(d) If Executive dies during the term hereof, BANK IV's
payment obligations under this Agreement shall terminate as of the
end of the month in which such death occurs.
4. Automobile. At the Effective Time, BANK IV shall
transfer to Executive the Cadillac automobile currently being
furnished to him by the Bank.
5. Relationship of Confidence and Trust. Executive
acknowledges that during his term of employment by the Bank and
First Dodge he has acquired valuable and confidential information,
trade secrets, and relationships with respect to the Bank's and
Metro Bank's successful business practices and operations,
including, by way of illustration and not of limitation, knowledge
of the Bank's and Metro Bank's customers, prices, selling
techniques, costs, and future plans (collectively "Proprietary
Information"). In addition Executive has developed and maintained
on behalf of the Bank and Metro Bank a personal acquaintance with
various persons, including, but not limited to, customers and
suppliers, which acquaintances may constitute the Bank's or Metro
Bank's only contact with such persons. As a consequence of the
foregoing, Executive occupies a position of trust and confidence
with respect to the Bank's and Metro Bank's affairs. In view of
the foregoing and in consideration of the consideration paid to
him, Executive agrees that it is reasonable and necessary for the
protection of the goodwill and business of the Bank, BANK IV, and
BANK IV Oklahoma, National Association ("BANK IV Oklahoma")
(collectively the "Banks"), that he make the covenants contained in
Paragraphs 6 and 7 regarding his conduct, and that the Banks will
suffer irreparable injury if he engages in conduct prohibited
thereby. The covenants contained in Paragraphs 6 and 7 shall each
be construed to be a separate agreement independent of any other
provision of this Agreement, and the existence of any claim or
cause of action of Executive against Fourth Financial or any of the
Banks, predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Banks of any of said
covenants. The covenants contained in Paragraphs 6 and 7 shall
survive the termination of this Agreement for any reason.
6. Disclosure of Proprietary Information. Executive
recognizes and acknowledges that the Proprietary Information and
all other information as to the business affairs of the Banks not
generally known to the public, as the same may exist from time to
time, are confidential information and are valuable, special, and
unique assets of the Banks' businesses. Executive therefore agrees
that he will never disclose any of the Proprietary Information, or
any other information as to the business affairs of either of the
Banks to any person, firm, corporation, association, or other
entity for any reason or purpose whatsoever except as he may be
compelled to do by legal process. In the event of a breach or
threatened breach by Executive of the provisions of this paragraph,
the Banks, or either of them, shall each be entitled to injunctive
or other equitable relief enjoining and restraining him from
disclosing, in whole or in part, any such Proprietary Information.
Nothing herein shall be construed as prohibiting the Banks from
pursuing any other remedies available to either of them for such
breach or threatened breach.
7. Restrictive Covenant. For a five-year period
commencing at the Effective Time and ending on the date of the
termination of this Agreement, Executive will not, within Tulsa or
Wagoner Counties in Oklahoma, or within 100 miles of Dodge City,
Kansas without the prior written consent of BANK IV or BANK IV
Oklahoma, as the case may be, directly or indirectly, own, manage,
operate, consult with, be employed by, or be connected with the
ownership, management, operation, or control of any business
engaged in the business of commercial banking, of making consumer
or commercial loans (other than credit sales), of accepting
deposits, or providing trust services; provided, nothing contained
in this sentence shall prohibit Executive from owning not more than
5% of the outstanding voting stock of any corporation or bank whose
securities are publicly traded. Executive agrees that, in addition
to all other remedies otherwise available to each of the Banks,
each of the Banks shall each have the right to injunctive relief to
restrain and enjoin any actual or threatened breaches of this
provision and that if in any litigation that might arise over the
provisions contained in this paragraph a court should determine
that the restrictions contained in this paragraph are too broad, or
too long in duration, or too broad in geographic scope to be
enforceable in equity, such provisions as such court might find
unenforceable are amended only so much as shall be necessary in
order for the restrictions contained herein to be enforceable and,
as so amended, shall be enforced by such court.
8. Notices. Any notices required or permitted to be
given under this Agreement shall be sufficient if in writing, and
if sent by registered or certified mail to his or her last known
residence in the case of Executive, or to its principal office in
the case of BANK IV or BANK IV Oklahoma.
9. Waiver of Breach. The waiver of a breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
10. Assignment. The rights and obligations of BANK IV
and BANK IV Oklahoma under this Agreement shall inure to the
benefit of, and shall be binding upon, BANK IV, BANK IV Oklahoma,
and their respective successors and assigns. Executive shall not
have the right to assign any of the rights or obligations contained
in this Agreement.
11. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an origi-
nal, but which together shall constitute but one agreement.
12. Captions. Captions used in this Agreement are for
convenience of reference only and shall not be deemed a part of
this Agreement nor used in the construction of its meaning.
13. Savings Clause. If any provision of this Agreement
shall be deemed invalid or unenforceable as written, it shall be
construed, to the greatest extent possible, in a manner which shall
render it valid and enforceable and any limitations on the scope or
duration of any such provision shall be deemed to be a part hereof.
No invalidity or unenforceability shall affect any other provision
of this Agreement unless the provision deemed to be so invalid or
unenforceable is a material element of this Agreement, taken as a
whole.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
FOURTH FINANCIAL CORPORATION
By___________________________
Its__________________________
"Fourth Financial"
[signatures continued]
FIRST NATIONAL BANK AND TRUST
COMPANY IN DODGE CITY
By____________________________
Its___________________________
"Bank"
______________________________
John V. Harding
"Executive"
EXHIBIT "G"
AFFILIATE'S AGREEMENT
---------------------
THIS AGREEMENT, made and entered into as of the ______ day of
____________, 1994, by and between __________________________
(hereinafter referred to as "Affiliate"), and FOURTH FINANCIAL
CORPORATION, a Kansas corporation (hereinafter referred to as
"Fourth").
W I T N E S S E T H: That;
- - - - - - - - - -
WHEREAS, Fourth, First Dodge City Bancshares, Inc. ("First
Dodge"), First National Bancshares of Dodge City, Inc. ("FNB"), and
Metro Bancshares, Inc. ("MBI") are parties to an Agreement and Plan
of Reorganization, dated as of February 2, 1994 (the "Agreement"),
which provides for, subject to various terms and conditions, the
merger of First Dodge, FNB, and MBI into Fourth (the "Fourth
Merger"), the merger of First National Bank and Trust Company in
Dodge City ("First National") into BANK IV Kansas, National
Association (the "BANK IV Kansas Merger"), and the merger of Metro
Bank of Broken Arrow into BANK IV Oklahoma, National Association
(the "BANK IV Oklahoma Merger") (the Fourth Merger, the BANK IV
Kansas Merger, and the BANK IV Oklahoma Merger being collectively
referred to herein as the "Mergers"); and
WHEREAS, Section 5.1.j of the Agreement provides that a
condition to Fourth's obligation to effect the Mergers is the
execution and delivery by each "affiliate" of First Dodge, MBI, and
First National, as such term is defined in the Agreement (an
"Affiliate"), of an agreement concerning the shares of common
stock, par value $5 per share, of Fourth ("Fourth Stock") to be
received by such Affiliate in the Mergers; and
WHEREAS, the parties desire to effect the Mergers and it is in
the best interests of the undersigned that the Mergers be effected;
NOW, THEREFORE, in consideration of the premises and the
issuance of Fourth Stock to the undersigned in the Mergers, and in
order to induce First Dodge, MBI, and First National and Fourth to
effect the Mergers, the undersigned hereby agree as follows:
1. Securities Act Restriction on Transfer and Sale.
Affiliate hereby agrees not to sell, pledge, offer to sell,
transfer, assign, or otherwise dispose of any of the shares of
Fourth Stock issued to Affiliate in the Mergers in violation of the
Securities Act of 1933, as amended.
2. Pooling of Interests Restriction on Transfer and Sale.
Affiliate hereby agrees not to sell, pledge, offer to sell,
transfer, assign, or otherwise dispose of any shares of Fourth
Stock to be received by Affiliate in the Mergers or in any other
way reduce Affiliate's risk relative to such shares (within the
meaning of Accounting Series Release No. 130) until such time as
financial results covering at least 30 days following the Mergers
have been published.
3. Restrictive Legend. Affiliate hereby acknowledges and
agrees that all certificates evidencing Fourth Stock to be issued
to Affiliate pursuant to the Mergers shall be subject to stop
transfer orders and shall bear a restrictive legend substantially
in the following form:
The shares of common stock represented by this
certificate have been issued or transferred to the
registered holder as the result of a transaction to which
Rule 145 under the Securities Act of 1933, as amended
(the "Act"), applies. Such shares may not be sold,
pledged, transferred, or assigned, and the issuer shall
not be required to give effect to any attempted sale,
pledge, transfer, or assignment, except (i) pursuant to
a then current effective registration under the Act, (ii)
in a transaction permitted by Rule 145 as to which the
issuer has, in the reasonable opinion of its counsel,
received reasonably satisfactory evidence of compliance
under Rule 145, or (iii) in a transaction which, in the
opinion of counsel satisfactory to the issuer or as
described in a "no-action" or interpretive letter from
the staff of the Securities and Exchange Commission, is
not required to be registered under the Act.
Transfer of the shares represented by this certificate is
further restricted by an Affiliate's Agreement dated as
of ____________________, 1994, between the issuer and the
registered holder to which reference is hereby made.
4. Miscellaneous. This Affiliate's Agreement constitutes
the entire agreement and understanding of the parties relating to
the subject matter hereof and may not be amended or modified except
by written instrument duly executed by the parties hereto. This
Affiliate's Agreement shall be governed by the laws of the State of
Kansas and shall be construed in accordance therewith. This
Affiliate's Agreement shall inure to the benefit of, and shall be
binding upon, the heirs, legatees, devisees, successors, trustees,
and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Affiliate's Agreement as of the date first above written.
FOURTH FINANCIAL CORPORATION
By________________________________
Darrell G. Knudson, Chairman of
the Board
"Fourth"
_________________________________
"Affiliate"
ANNEX II
Section 1091 of the Oklahoma General Corporation Act
1091 APPRAISAL RIGHTS. - A. Any shareholder of a
corporation of this state who holds shares of stock on the date
of the making of a demand pursuant to the provisions of
subsection D of this section with respect to such shares, who
continuously holds such shares through the effective date of the
merger or consolidation, who has otherwise complied with the
provisions of subsection D of this section and who has neither
voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to the provisions of Section 1073 of
this title shall be entitled to an appraisal by the district
court of the fair value of his shares of stock under the
circumstances described in subsections B and C of this section.
As used in this section, the word "shareholder" means a holder of
record of stock in a stock corporation and also a member of
record of a nonstock corporation; the words "stock" and "share"
mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock
corporation. The provisions of this subsection shall be
effective only with respect to mergers or consolidations
consummated pursuant to an agreement of merger or consolidation
entered into after November 1, 1988.
B. 1. Except as otherwise provided for in this
subsection, appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation or of the acquired corporation in a share
acquisition, to be effected pursuant to the provisions of
Sections 1081, 1082, 1086, 1087, or 1091.1 of this title or
Section 12 of this act.
2. a. No appraisal rights under this section shall be
available for the shares of any class or series of stock which,
at the record date fixed to determine the shareholders entitled
to receive notice of and to vote at the meeting of shareholders
to act upon the agreement of merger or consolidation, were
either:
(1) listed on a national securities exchange; or
(2) held of record by more than two thousand
shareholders.
b. In addition, no appraisal rights shall be available for
any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of
the shareholders of the surviving corporation as provided for in
subsection F of Section 1081 of this title.
3. Notwithstanding the provisions of paragraph 2 of this
subsection, appraisal rights provided for in this section shall
be available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
the provisions of Sections 1081, 1082, 1086 or 1087 of this title
to accept for such stock anything except:
a. shares of stock of the corporation surviving or
resulting from such merger or consolidation; or
b. shares of stock of any other corporation which at the
effective date of the merger or consolidation will be either
listed on a national securities exchange or held of record by
more than two thousand shareholders; or
c. cash in lieu of fractional shares of the corporations
described in subparagraphs a and b of this paragraph; or
d. any combination of the shares of stock and cash in-lieu
of the fractional shares described in subparagraphs a, b and c of
this paragraph.
4. In the event all of the stock of a subsidiary Oklahoma
corporation party to a merger effected pursuant to the provisions
of Section 1083 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Oklahoma
corporation.
C. Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those
set forth in subsections D and E of this section, shall apply as
nearly as is practicable.
D. Appraisal rights shall be perfected as follows:
1. If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of shareholders, the
corporation, not less than twenty (20) days prior to the meeting,
shall notify each of its shareholders entitled to such appraisal
rights that appraisal rights are available for any or all of the
shares of the constituent corporations, and shall include in such
notice a copy of this section. Each shareholder electing to
demand the appraisal of the shares of the shareholder shall
deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of the
shares of the shareholder. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the
shareholder and that the shareholder intends thereby to demand
the appraisal of the shares of the shareholder. A proxy or vote
against the merger or consolidation shall not constitute such a
demand. As shareholder electing to take such action must do so
by a separate written demand as herein provided. Within ten (10)
days after the effective date of such merger or consolidation,
the surviving or resulting corporation shall notify each
shareholder of each constituent corporation who has complied with
the provisions of this subsection and has not voted in favor of
or consented to the merger or consolidation as of the date that
the merger or consolidation has become effective; or
2. If the merger or consolidation was approved pursuant to
the provisions of Section 1073 or 1083 of this title, the
surviving or resulting corporation, either before the effective
date of the merger or consolidation or within ten (10) days
thereafter, shall notify each of the shareholders entitled to
appraisal rights of the effective date of the merger or
consolidation and that appraisal rights are available for any or
all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall
be sent by certified or registered mail, return receipt
requested, addressed to the shareholder at the address of the
shareholder as it appears on the records of the corporation. Any
shareholder entitled to appraisal rights may, within twenty (20)
days after the date of mailing of the notice, demand in writing
from the surviving or resulting corporation the appraisal of the
shares of the shareholder. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the
shareholder and that the shareholder intends to demand the
appraisal of the shares of the shareholder.
E. Within one hundred twenty (120) days after the
effective date of the merger or consolidation, the surviving or
resulting corporation or any shareholder who has complied with
the provisions of subsections A and D of this section and who is
otherwise entitled to appraisal rights, may file a petition in
district court demanding a determination of the value of the
stock of all such shareholders. Provided, however, at any time
within sixty (60) days after the effective date of the merger or
consolidation, any shareholder shall have the right to withdraw
the demand of the shareholder for appraisal and to accept the
terms offered upon the merger or consolidation. Within one
hundred twenty (120) days after the effective date of the merger
or consolidation, any shareholder who has complied with the
requirements of subsections A and D of this section, upon written
request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number
of holders of such shares. Such written statement shall be
mailed to the shareholder within ten (10) days after the
shareholder's written request for such a statement is received by
the surviving or resulting corporation or within ten (10) days
after expiration of the period for delivery of demands for
appraisal pursuant to the provisions of subsection D of this
section, whichever is later.
F. Upon the filing of any such petition by a shareholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which, within twenty (20) days after such
service, shall file in the office of the court clerk of the
district court in which the petition was filed a duly verified
list containing the names and addresses of all shareholders who
have demanded payment for their shares and with whom agreements
as to the value of their shares have not been reached by the
surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition
shall be accompanied by such a duly verified list. The court
clerk, if so ordered by the court, shall give notice of the time
and place fixed for the hearing of such petition by registered or
certified mail to the surviving or resulting corporation and to
the shareholders shown on the list at the addresses therein
stated. Such notice shall also be given by one or more
publications at least one (1) week before the day of the hearing,
in a newspaper of general circulation published in the City of
Oklahoma City, Oklahoma, or such publication as the court deems
advisable. The forms of the notices by mail and by publication
shall be approved by the court, and the costs thereof shall be
borne by the surviving or resulting corporation.
G. At the hearing on such petition, the court shall
determine the shareholders who have complied with the provisions
of this section and who have become entitled to appraisal rights.
The court may require the shareholders who have demanded an
appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the court
clerk for notation thereon of the pendency of the appraisal
proceedings; and if any shareholder fails to comply with such
direction, the court may dismiss the proceedings as to such
shareholder.
H. After determining the shareholders entitled to an
appraisal, the court shall appraise the shares, determining their
fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such
fair value, the court shall take into account all relevant
factors. In determining the fair rate of interest, the court may
consider all relevant factors, including the rate of interest
which the surviving or resulting corporation would have to pay to
borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any
shareholder entitled to participate in the appraisal proceeding,
the court may, in its discretion, permit discovery or other
pretrial proceedings and may proceed to trial upon the appraisal
prior to the final determination of the shareholder entitled to
an appraisal. Any shareholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to the
provisions of subsection F of this section and who has submitted
the certificates of stock of the shareholder to the court clerk,
if such is required, may participate fully in all proceedings
until it is finally determined that the shareholder is not
entitled to appraisal rights pursuant to the provisions of this
section.
I. The court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the shareholders entitled thereto.
Interest may be simple or compound, as the court may direct.
Payment shall be so made to each such shareholder, in the case of
holders of uncertificated stock immediately, and in the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The court's decree may be enforced as other decrees in the
district court may be enforced, whether such surviving or
resulting corporation be a corporation of this state or of any
other state.
J. The costs of the proceeding may be determined by the
court and taxed upon the parties as the court deems equitable in
the circumstances. Upon application of a shareholder, the court
may order all or a portion of the expenses incurred by any
shareholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the
value of all of the shares entitled to an appraisal.
K. From and after the effective date of the merger or
consolidation, no shareholder who has demanded the appraisal
rights of the shareholder as provided for in subsection D of this
section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the
stock, except dividends or other distributions payable to
shareholders of record at a date which is prior to the effective
date of the merger or consolidation; provided, however, that if
no petition for an appraisal shall be filed within the time
provided for in subsection E of this section, or if such
shareholder shall deliver to the surviving or resulting
corporation a written withdrawal of the shareholder's demand for
an appraisal and an acceptance of the merger or consolidation,
either within sixty (60) days after the effective date of the
merger or consolidation as provided for in subsection E of this
section or thereafter with the written approval of the
corporation, then the right of such shareholder to an appraisal
shall cease. Provided, however, no appraisal proceeding in the
district court shall be dismissed as to any shareholder without
the approval of the court, and such approval may be conditioned
upon such terms as the court deems just.
L. The shares of the surviving or resulting corporation
into which the shares of such objecting shareholders would have
been converted had they assented to the merger or consolidation
shall have the status of authorized and unissued shares of the
surviving or resulting corporation.
ANNEX III
12 U.S.C.
Section 215a. Merger of national banks or State banks into national
banks
(b) Dissenting shareholders
If a merger shall be voted for at the called meetings
by the necessary majorities of the shareholders of each
association or State bank participating in the plan of merger,
and thereafter the merger shall be approved by the Comptroller,
any shareholder of any association or State bank to be merged
into the receiving association who has voted against such merger
at the meeting of the association or bank of which he is a
stockholder, or has given notice in writing at or prior to such
meeting to the presiding officer that he dissents from the plan
of merger, shall be entitled to receive the value of the shares
so held by him when such merger shall be approved by the
Comptroller upon written request made to the receiving
association at any time before thirty days after the date of
consummation of the merger, accompanied by the surrender of his
stock certificates.
(c) Valuation of shares
The value of the shares of any dissenting shareholder
shall be ascertained, as of the effective date of the merger, by
an appraisal made by a committee of three persons, composed of
(1) one selected by the vote of the holders of the majority of
the stock, the owners of which are entitled to payment in cash;
(2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation
agreed upon by any two of the three appraisers shall govern. If
the value so fixed shall not be satisfactory to any dissenting
shareholder who has requested payment, that shareholder may,
within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the
value of the shares of the appellant.
(d) Application to shareholders of merging associations:
appraisal by Comptroller; expenses of receiving
association; sale and resale of shares; State appraisal
and merger law
If, within ninety days from the date of consummation of
the merger, for any reason one or more of the appraisers is not
selected as herein provided, or the appraisers fail to determine
the value of such shares, the Comptroller shall upon written
request of any interested party cause an appraisal to be made
which shall be final and binding on all parties. The expenses of
the Comptroller in making the reappraisal or the appraisal, as
the case may be, shall be paid by the receiving association. The
value of shares ascertained shall be promptly paid to the
dissenting shareholders by the receiving association. The shares
of stock of the receiving association which would have been
delivered to such dissenting shareholders had they not requested
payment shall be sold by the receiving association at an
advertised public auction, and the receiving association shall
have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of
reselling such shares within thirty days thereafter to such
person or persons and at such price not less than par as its
board of directors by resolution may determine. If the shares
are sold at public auction at a price greater than the amount
paid to the dissenting shareholders, the excess in such sale
price shall be paid to such dissenting shareholders. The
appraisal of such shares of stock in any State bank shall be
determined in the manner prescribed by the law of the State in
such cases, rather than as provided in this section, if such
provision is made in the State law; and no such merger shall be
in contravention of the law of the State under which such bank is
incorporated. The provisions of this subsection shall apply only
to shareholders of (and stock owned by them in) a bank or
association being merged into the receiving association.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
-----------------------------------------
Section 8.01 of Registrant's Bylaws provides as follows:
To the fullest extent permissible under the Kansas General
Corporation Code or the indemnification provisions of any
successor statute, the Corporation shall (a) indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, or
employee of the Corporation or of a subsidiary of the
Corporation, or is or was serving at the request of the
Corporation as a director, officer, or employee of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit, and (b) indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the Corporation), by reason
of the fact that he is or was a director, officer, or employee of
the Corporation or of a subsidiary of the Corporation or is or
was serving at the request of the Corporation as a director,
officer, or employee of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection
with any such action, suit or proceeding. The foregoing right of
indemnification shall in no way be exclusive of any other rights
of indemnification to which any such person may be entitled under
any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, and shall inure to the benefit of the
heirs, executors, and administrators of such a person. The
Corporation may, but shall not be required to, purchase liability
insurance indemnifying the directors, officers, and employees of
the Corporation and its subsidiaries.
Kansas Statutes Annotated Section 17-6305 provides as follows:
(a) A corporation shall have power to indemnify any person
who was or is a party, or is threatened to be made a party, to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, other
than an action by or in the right of the corporation, by reason
of the fact that such person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding,
including attorney fees, if such person acted in good faith and
in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation; and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe such person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person
who was or is a party, or is threatened to be made a party, to
any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses actually and
reasonably incurred by such person in connection with the defense
or settlement of such action or suit, including attorney fees, if
such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall
deem proper.
(c) To the extent that a director, officer, employee or
agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b), or in defense of any claim, issue
or matter therein, such director, officer, employee or agent
shall be indemnified against expenses actually and reasonably
incurred by such person in connection therewith, including
attorney fees.
(d) Any indemnification under subsections (a) and (b),
unless ordered by a court, shall be made by the corporation only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is
proper in the circumstances because such director, officer,
employee or agent has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be
made (1) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit
or proceeding, or (2) if such a quorum is not obtainable, or even
if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses incurred by a director or officer in defending
a civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay such amount if it is
ultimately determined that the director or officer is not
entitled to be indemnified by the corporation as authorized in
this section. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in a
person's official capacity and as to action in another capacity
while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such
person against such liability under the provisions of this
section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors, officers and
employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall
stand in the same position under this section with respect to the
resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence
had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefits plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as
a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted
in good faith and in a manner such person reasonably believed to
be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interests of the corporation" as
referred to in this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators
of such a person.
Pursuant to a policy of directors' and officers' liability
insurance having limits of $15,000,000, the directors and officers of
the Registrant are insured, subject to the limits, retention,
exceptions, and other terms and conditions of the policy, against
liability for any actual or alleged error or misstatement or misleading
statement or act or omission or neglect or breach of duty while acting
in their capacities as directors or officers of the Registrant.
Item 21. Exhibits and Financial Statement Schedules.
------------------------------------------
(a) Exhibits:
2.1 Agreement and Plan of Reorganization, dated as of
February 2, 1994, among Fourth Financial
Corporation, First Dodge City Bancshares, Inc.,
First National Bancshares of Dodge City, Inc., Metro
Bancshares, Inc., Metro Bank of Broken Arrow, First
National Bank and Trust Company in Dodge City, and
the stockholders of First Dodge City Bancshares,
Inc. and exhibits thereto (Exhibit 10.13 to Form 10-
K for the year ended December 31, 1993).*
4.1 Restated Articles of Incorporation of Fourth
Financial Corporation, dated August 10, 1992
(Exhibit 3.01 to Form 10-Q for quarter ended June
30, 1992).*
4.2 Bylaws (Exhibit 3.05 to Form 10-K for the year ended
December 31, 1993).*
5.1 Opinion of Foulston & Siefkin.
8.1 Income Tax Opinion of Mangan, Dalton, Trenkle,
Rebein & Doll Chartered.
13.1 Annual Report of Fourth Financial Corporation on
Form 10-K for fiscal year ended December 31, 1993.*
23.1 See page II-9 of this Registration Statement for the
consent of Ernst & Young.
23.2 See page II-10 of this Registration Statement for
the consent of Arthur Andersen & Co.
23.3 See page II-11 of this Registration Statement for
the consent of Sartain Fischbein & Co.
23.4 See page II-12 of this Registration Statement for
the consent of GRA, Thompson, White & Co., P.A.
23.5 See page II-13 of this Registration Statement for
the consent of Grant Thornton.
23.6 See page II-14 of this Registration Statement for
the consent of Deloitte & Touche.
23.7 See page II-15 of this Registration Statement for
the consent of Smoll, Banning & Neier, Chartered.
23.8 See page II-16 of this Registration Statement for
the consent of Baird, Kurtz & Dobson.
23.9 The consent of Foulston & Siefkin is included in
their opinion filed as Exhibit 5.1 hereto.
23.10 The consent of Mangan, Dalton, Trenkle, Rebein &
Doll Chartered is included in their opinion filed as
Exhibit 8.1 hereto.
24.1 Power of Attorney (included on signature page).
99.1 Form of Proxy to be used at First Dodge Special
Meeting.
99.2 Form of Proxy to be used at MBI Special Meeting.
99.3 Form of Proxy to be used at First National Special
Meeting.
99.4 Form of Affiliate's Agreement (Exhibit "G" to
Exhibit 10.13 to Form 10-K for the year ended
December 31, 1993).*
__________________________
* Previously filed with Securities and Exchange Commission and
incorporated herein by reference.
(b) Financial Statement Schedules:
NONE
Item 22. Undertakings.
------------
1. The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
2. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
4. The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through
the date of responding to the request.
5. The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was
not the subject of and included in the registration statement when it
became effective.
6. The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called for
by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
7. The registrant undertakes that every prospectus: (i) that
is filed pursuant to paragraph 6 immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City
of Wichita, State of Kansas, on May 3, 1994.
Fourth Financial Corporation
By /s/Darrell G. Knudson
---------------------------
Darrell G. Knudson
Chairman of the Board
POWER OF ATTORNEY
-----------------
Each person whose signature appears below hereby constitutes and
appoints Darrell G. Knudson, William J. Rainey, and Michael J. Shonka,
and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every
act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- ------------------------------------------------------------------------------
/s/ Darrell G. Knudson
- ----------------------------- Chairman of the Board
Darrell G. Knudson (Principal Executive Officer
of the Issuer) May 3, 1994
/s/ Michael J. Shonka
- ----------------------------- Senior Vice President
Michael J. Shonka (Principal Financial Officer) May 3, 1994
/s/ Barbara M. Noyes
- ---------------------------- Vice President and Controller
Barbara M. Noyes (Principal Accounting Officer) May 3, 1994
- ---------------------------- Director May __, 1994
Lionel D. Alford
/s/ Thomas R Clevenger
- ---------------------------- Director May 3, 1994
Thomas R. Clevenger
/s/ Jordan L. Haines
- ---------------------------- Director May 3, 1994
Jordan L. Haines
- ---------------------------- Director May __, 1994
Lawrence M. Jones
- ---------------------------- Director May __, 1994
Joseph M. Klein
/s/ Darrell G. Knudson
- ---------------------------- Director May 3, 1994
Darrell G. Knudson
- ---------------------------- Director May __, 1994
Fred L. Merrill, Sr.
/s/ Russell W. Meyer, Jr.
- ---------------------------- Director May 3, 1994
Russell W. Meyer, Jr.
- ---------------------------- Director May __, 1994
Laird G. Noller
/s/ Patrick E. O'Shaughnessy
- ---------------------------- Director May 3, 1994
Patrick E. O'Shaughnessy
/s/ Robert F. Vickers
- ---------------------------- Director May 3, 1994
Robert F. Vickers
/s/ Ken Wagnon
- ---------------------------- Director May 3, 1994
Ken Wagnon
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Fourth Financial
Corporation for the registration of 662,220 shares of its common stock and to
the incorporation by reference therein of our report dated January 20, 1994,
with respect to the consolidated financial statements of Fourth Financial
Corporation included in its Annual Report (Form 10-K) for the year ended
December 31, 1993, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG
ERNST & YOUNG
Wichita, Kansas
May 3, 1994
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports (and to all reference to our Firm) included in or made part
in this registration statement.
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Tulsa, Oklahoma
May 2, 1994
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this registration
statement of our report dated February 19, 1993, with respect to the
consolidated financial statements of Commercial Landmark Corporation
included in Fourth Financial Corporation's Annual Report on Form 10-K for
the year ended December 31, 1993, and to the use of our name as it appears
under the caption "Experts".
/s/ Sartain Fischbein & Co.
SARTAIN FISCHBEIN & CO.
May 2, 1994
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference of our firm under the heading "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Fourth
Financial Corporation for the registration of up to 662,220 shares of its
common stock. We also consent to the incorporation by reference of our
report dated September 16, 1993, with respect to the consolidated
financial statements of Ponca Bancshares, Inc. and Subsidiary included in
Fourth Financial Corporation's Annual Report on Form 10-K for the year
ended December 31, 1993.
/s/ GRA, Thompson, White & Co., P.A.
GRA, THOMPSON, WHITE & CO., P.A.
Merriam, Kansas
May 2, 1994
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 23, 1992 with respect to the
consolidated financial statements, not appearing therein, of United Bank
of Kansas, Inc. and Subsidiary included in Fourth Financial Corporation's
Annual Report on Form 10-K for the year ended December 31, 1993 which is
incorporated by reference in this Registration Statement (Form S-4) and
related Prospectus. We consent to the incorporation by reference in the
Registration Statement and related Prospectus of the aforementioned report
and to the use of our name as it appears under the caption "Experts".
/s/ Grant Thornton
GRANT THORNTON
Wichita, Kansas
May 3, 1994
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Fourth Financial Corporation on Form S-4 of our report on the
financial statements of KNB Bancshares, Inc. and Subsidiaries for the year
ended December 31, 1991, dated February 7, 1992, appearing in the Annual
Report on Form 10-K of Fourth Financial Corporation for the year ended
December 31, 1993, and to the reference to us under the heading "Experts"
in the Proxy Statement-Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Kansas City, Missouri
May 2, 1994
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-4) and related
Prospectus of Fourth Financial Corporation for the registration of
590,711 shares of its common stock and to the incorporation by
reference therein of our reports, dated as indicated below, with
respect to the consolidated financial statements of:
Entity Report dated
- ------------------------------ -----------------------------------
First Dodge City Bancshares, January 21, 1994, except for
Inc. Note 15, as to which the date is
February 25, 1994, and except for
the compiled financial statements
referred to in this report, as to
which the date is March 30, 1994
Metro Bancshares, Inc. January 21, 1994, except for Note
14, as to which the date is
february 25, 1994, and except for
the compiled financial statements
referred to in this report, as to
which the date is March 30, 1994
First National Bank and Trust January 21, 1994, except for Note
Company in Dodge City 13, as to which the date is
February 25, 1994
/s/ Smoll, Banning and Neier, Chtd.
Dodge City, Kansas
May 3, 1994
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Great Southern Bancorp, Inc.
We consent to the reference to our firm under the caption "Experts"
and to the use of our report dated August 6, 1993, with respect to the
consolidated financial statements of GREAT SOUTHERN BANCORP, INC. included
in the Prospectus and Registration Statement (Form S-4) of Fourth
Financial Corporation for the registration of 662,220 shares of its common
stock.
We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ BAIRD, KURTZ & DOBSON
BAIRD, KURTZ & DOBSON
Springfield, Missouri
May 2, 1994
EXHIBIT INDEX
<TABLE>
(CAPTION>
Exhibit Page
No. Description No.
- ------- ----------- -----
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of February 2, 1994, among Fourth
Financial Corporation, First Dodge City Bancshares, Inc., First National Bancshares
of Dodge City, Inc., Metro Bancshares, Inc., Metro Bank of Broken Arrow, First
National Bank and Trust Company in Dodge City, and the stockholders of First Dodge
City Bancshares, Inc. and exhibits thereto (Exhibit 10.13 to Form 10-K for the year
ended December 31, 1993).*
4.1 Restated Articles of Incorporation of Fourth Financial Corporation, dated August
10, 1992 (Exhibit 3.01 to Form 10-Q for quarter ended June 30, 1992).*
4.2 Bylaws (Exhibit 3.05 to Form 10-K for the year ended December 31, 1993).*
5.1 Opinion of Foulston & Siefkin.
8.1 Income Tax Opinion of Mangan, Dalton, Trenkle, Rebein & Doll Chartered.
13.1 Annual Report of Fourth Financial Corporation on Form 10-K for fiscal year ended
December 31, 1993.*
23.1 See page II-9 of this Registration Statement for the consent of Ernst & Young.
23.2 See page II-10 of this Registration Statement for the consent of Arthur Andersen
& Co.
23.3 See page II-11 of this Registration Statement for the consent of Sartain Fischbein
& Co.
23.4 See page II-12 of this Registration Statement for the consent of GRA, Thompson,
White & Co., P.A.
23.5 See page II-13 of this Registration Statement for the consent of Grant Thornton.
23.6 See page II-14 of this Registration Statement for the consent of Deloitte & Touche.
23.7 See page II-15 of this Registration Statement for the consent of Smoll, Banning &
Neier, Chartered.
23.8 See page II-16 of this Registration Statement for the consent of Baird, Kurtz &
Dobson.
23.9 The consent of Foulston & Siefkin is included in their opinion filed as Exhibit 5.1
hereto.
23.10 The consent of Mangan, Dalton, Trenkle, Rebein & Doll Chartered is included in
their opinion filed as Exhibit 8.1 hereto.
24.1 Power of Attorney (included on signature page).
99.1 Form of Proxy to be used at First Dodge Special Meeting.
99.2 Form of Proxy to be used at MBI Special Meeting.
99.3 Form of Proxy to be used at First National Special Meeting.
99.4 Form of Affiliate's Agreement (Exhibit "G" to Exhibit 10.13 to Form 10-K for the
year ended December 31, 1993).*
__________________________
* Previously filed with Securities and Exchange Commission and incorporated herein by
reference.
</TABLE>
Exhibit 5.1
FOULSTON & SIEFKIN
700 Fourth Financial Center
Wichita, Kansas 67202
316/267-6371
May 3, 1994
Fourth Financial Corporation
100 North Broadway
Wichita, Kansas 67202
Re: Registration Statement
Form S-4 (First Dodge City Bancshares, Inc.)
Dear Sirs:
In connection with the proposed public offering by Fourth
Financial Corporation (the "Company") of 662,220 shares (the
"Shares") of its Common Stock, par value $5.00, to be issued by the
Company in connection with consummation of two mergers pursuant to
an Agreement and Plan of Reorganization, dated as of February 2,
1994, among Fourth Financial Corporation, First Dodge City
Bancshares, Inc., First National Bancshares of Dodge City, Inc.,
Metro Bancshares, Inc., First National Bank in Dodge City, Metro
Bank of Broken Arrow, and the stockholders of First Dodge City
Bancshares, Inc., a related Agreement of Merger, and a related
Agreement to Merge (collectively, the "Agreement"), we have
examined the corporate records and proceedings of the Company, the
Agreement, and the above described Registration Statement (the
"Registration Statement") with respect to:
1. The organization of the Company;
2. The legal sufficiency of all corporate
proceedings of the Company taken in connection with the
creation, issuance, the form and validity, and full
payment and nonassessability, of all the presently
outstanding and issued stock of the Company; and
3. The legal sufficiency of all corporate
proceedings of the Company taken in connection with the
creation, issuance, and the form and validity of the
Shares, and full payment and nonassessability, when
issued pursuant to the Agreement, of the Shares.
Based upon such examination, we are of the opinion that:
(a) Fourth Financial Corporation is duly organized and
validly existing in good standing under the laws of the State of
Kansas;
(b) The Company is authorized to have issued and
outstanding 50,000,000 shares of Common Stock of the par value of
$5.00 per share;
(c) The Company has taken all necessary and required
corporate proceedings in connection with the creation and issuance
of all the presently issued and outstanding Common Stock of the
Company, and all of said stock so issued has been validly issued,
is fully paid and nonassessable, and in all respects is in proper
form and valid;
(d) When the Registration Statement shall have been
declared effective by order of the Securities and Exchange
Commission, the Agreement shall have been duly approved and adopted
by the stockholders of First Dodge City Bancshares, Inc., Metro
Bancshares, Inc., and First National Bank in Dodge City, and the
Shares shall have been issued upon the terms and conditions set
forth in the Agreement, then the Shares will be validly issued and
outstanding, fully paid, and nonassessable.
We hereby consent (1) to be named in the Registration
Statement, and in the Proxy Statement-Prospectus which constitutes
a part thereof, as the attorneys who will pass upon legal matters
in connection with the sale of the Shares covered by the
Registration Statement, and (2) to the filing of this opinion as
Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ Foulston & Siefkin
FOULSTON & SIEFKIN
Exhibit 8.1
Mangan, Dalton, Trenkle, Rebein & Doll Chartered
Attorneys
208 West Spruce
Dodge City, Kansas 67801-4425
(316) 227-8126
FAX (316) 227-8451
May 2, 1994
via UPS Next Day Air
Fourth Financial Corporation
100 North Broadway
Wichita, Kansas 67202
RE: FOURTH FINANCIAL CORPORATION
REGISTRATION STATEMENT ON FORM S-4
Gentlemen:
We are acting as special counsel to First Dodge City Bancshares,
Inc., ("First Dodge"), Metro Bancshares, Inc. ("MBI"), and First
National Bank and Trust Company in Dodge City ("First National"),
in connection with the proposed simultaneous mergers of First
Dodge, MBI, First National Bancshares of Dodge City, Inc. ("FNB"),
into Fourth Financial Corporation ("Fourth Financial") and First
National into BANK IV Kansas, National Association ("BANK IV
Kansas") (collectively, the "Mergers") pursuant to the terms of an
Agreement and Plan of Reorganization dated as of February 2, 1994,
among Fourth Financial, First Dodge, FNB, MBI, First National,
Metro Bank of Broken Arrow, and the stockholders of First Dodge
(the "Agreement").
We have examined and are familiar with the originals or copies, the
authenticity of which has been established to our satisfaction, of
all documents, including, but not limited to, the Agreement,
Registration Statement on Form S-4 (the "Registration Statement")
to be filed with the Securities and Exchange Commission, corporate
records, and other instruments, we have deemed necessary to express
the opinion hereinafter set forth.
Based upon the foregoing, and upon consideration of applicable
federal income tax laws, and subject to the additional
qualifications, assumptions and limitations hereinafter set forth,
we are of the opinion that the description in the Registration
Statement under the caption "Federal Income Tax Consequences," to
the extent it involves matters of law or states our opinion, is
correct in all material respects.
Fourth Financial Corporation
RE: REGISTRATION STATEMENT
May 2, 1994
Page 2
___________________________________
The opinion expressed above is subject to the following additional
qualifications, assumptions, and limitations:
(a) The opinion expressed herein assumes Fourth
Financial has no plan or intention to reacquire any of its stock
issued in the Mergers, or to sell or otherwise dispose of any of
the assets of the merged entities acquired in the Mergers.
(b) The opinion expressed herein assumes that, following
the Mergers, Fourth Financial and BANK IV Kansas will directly or
indirectly continue the historic business of each of the merged
entities, and will use a significant portion of the merged
entities' historic business assets in such businesses.
(c) The opinion expressed herein is as of the date
hereof and we assume no obligation to update or supplement such
opinion to reflect any facts or circumstances which may hereafter
come to our attention or changes in law which may hereafter occur
or become effective.
(d) The opinion expressed herein is furnished to you
solely for use in connection with the Registration Statement.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption
"Legal Matters" in the Registration Statement.
Sincerely yours,
/s/ William P. Trenkle, Jr.
William P. Trenkle, Jr.
WPT/me
Exhibit 99.1
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
FIRST DODGE CITY BANCSHARES, INC.
The undersigned hereby appoints John V. Harding and Thomas P. Shirley,
and each of them, each with the power to act alone and with full power of
substitution, as attorneys and proxies of the undersigned to
attend the Special Meeting of Stockholders of First Dodge City Bancshares,
Inc. (the "Corporation"), to be held on June 15, 1994, at 9:50 a.m.,
Central Daylight Savings Time, and all
adjournments thereof, and there to vote all shares of capital stock of
the Corporation held of record by the undersigned as follows:
1. Approval and adoption of an Agreement and Plan of
Reorganization, dated as of February 2, 1994,
among Fourth Financial Corporation ("Fourth
Financial"), the Corporation, First National Bancshares of Dodge
City, Inc. ("FNB"), Metro Bancshares, Inc. ("MBI"), First
National Bank and Trust Company in Dodge City,
Metro Bank of Broken Arrow, and the stockholders of
the Corporation, and the related Agreement of Merger
which provides for the merger of the Corporation,
FNB, and MBI into Fourth Financial, all as described
in the Notice of such meeting and the Joint Proxy
Statement-Prospectus which accompanied such Notice.
FOR ___ AGAINST ___ ABSTAIN ___
2. In their discretion on such other matters as may properly come
before the meeting.
This proxy will be voted as directed, or if no direction is indicated with
respect to Item 1, this proxy will be voted FOR the proposal.
DATED: ____________, 1994
___________________________________________
Signature
___________________________________________
Signature if held jointly
Please sign exactly as name(s) appear(s) hereon and return promptly in the
enclosed envelope, indicating official position or representative capacity
where applicable.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
Exhibit 99.2
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
METRO BANCSHARES, INC.
The undersigned hereby appoints John V. Harding and Thomas P. Shirley,
and each of them, each with the power to act alone and with full power of
substitution, as attorneys and proxies of the undersigned to attend the
Special Meeting of Stockholders of Metro Bancshares, Inc. (the
"Corporation"), to be held on June 15, 1994, at 11:00 a.m., Central
Daylight Savings Time, and all adjournments thereof, and there to vote all
shares of capital stock of the Corporation held of record
by the undersigned as follows:
1. Approval and adoption of an Agreement and Plan of Reorganization,
dated as of February 2, 1994, among Fourth Financial Corporation
("Fourth Financial"), the Corporation, First Dodge City
Bancshares, Inc. ("First Dodge"), First National
Bancshares of Dodge City, Inc. ("FNB"), First National Bank and
Trust Company in Dodge City, Metro Bank of Broken Arrow, and the
stockholders of First Dodge, and the related Agreement of Merger
which provides for the merger of the
Corporation, First Dodge, and FNB,
into Fourth Financial, all as described in the
Notice of such meeting and the Joint Proxy Statement-Prospectus
which accompanied such Notice.
FOR ___ AGAINST ___ ABSTAIN ___
2. In their discretion on such other matters as may properly come
before the meeting.
This proxy will be voted as directed, or if no direction is indicated with
respect to Item 1, this proxy will be voted FOR the proposal.
DATED: ____________, 1994
___________________________________________
Signature
___________________________________________
Signature if held jointly
Please sign exactly as name(s) appear(s) hereon and return promptly in the
enclosed envelope, indicating official position or representative
capacity where applicable.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
Exhibit 99.3
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
FIRST NATIONAL BANK AND TRUST COMPANY
IN DODGE CITY
The undersigned hereby appoints John V. Harding and Thomas P. Shirley,
and each of them, each with the power to act alone and with full
power of substitution, as attorneys and proxies of the
undersigned to attend the Special Meeting of Stockholders of First National
Bank and Trust Company in Dodge City (the "Bank"), to be held
on June 15, 1994, at 10:00 a.m., Central Daylight Savings
Time, and all adjournments thereof, and there to vote all shares of capital
stock of the Bank held of record by the undersigned as follows:
1. Approval and adoption of an Agreement and Plan of Reorganization,
dated as of February 2, 1994, among Fourth Financial
Corporation, the Bank, First Dodge City
Bancshares, Inc. ("First Dodge"), First National Bancshares
of Dodge City, Inc., Metro Bancshares, Inc., Metro Bank of
Broken Arrow, and the stockholders of First
Dodge, and the related Agreement to Merge which provides for
the merger of the Bank into BANK IV Kansas,
National Association, all as described in the Notice of
such meeting and the Joint Proxy Statement-Prospectus which
accompanied such Notice.
FOR ___ AGAINST ___ ABSTAIN ___
2. In their discretion on such other matters as may properly come
before the meeting.
This proxy will be voted as directed, or if no direction is indicated with
respect to Item 1, this proxy will be voted FOR the proposal.
DATED: ____________, 1994
___________________________________________
Signature
___________________________________________
Signature if held jointly
Please sign exactly as name(s) appear(s) hereon and return promptly in the
enclosed envelope, indicating official position or representative capacity
where applicable.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.